Can you deduct credit card interest for business purchases?

Generally, yes: you can usually deduct credit card interest to the extent the card balance was used for legitimate business purchases.

A few important rules apply:

• The purchase must be an ordinary and necessary business expense.
• Interest tied to personal purchases is not deductible.
• If a card is used for both business and personal spending, you need to allocate the interest so only the business portion is deducted. In practice, that means tracing the business and personal charges and the related interest by billing cycle or other reasonable method.
• The deduction is claimed on the return for your business entity and the exact form depends on the structure.

How it’s usually reported:

• Sole proprietors: Schedule C, generally in the interest area of the form.
• Partnerships: Form 1065.
• S corporations: Form 1120-S.
• C corporations: Form 1120.

Practical tip: Keeping a separate business credit card makes this much easier and reduces the risk of errors.

Because tax rules and forms can change and your facts matter, it’s a good idea to check the current IRS instructions or ask a CPA before filing.