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Are credit card fees tax deductible?
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While credit card fees on a card used for personal expenses aren’t tax deductible, fees on a card used for business expenses may be. Read on and we’ll break down what the IRS has to say on the matter.
Are credit card annual fees tax deductible?
Here’s the good news — annual fees and some other credit card fees, on business credit cards are tax deductible, according to guidelines from IRS Publication 535. In order for an expense to be deductible, it must be “both ordinary and necessary,” the IRS specifies. Here’s how the agency defines such expenses:
- Ordinary expenses are “common and accepted in your industry.”
- Necessary expenses are “helpful and appropriate for your trade or business.”
Business credit card annual fees fall into these requirements since many of the daily business transactions you make will be paid for with a credit card, and the annual fee helps provide a payment method.
Are other credit card fees tax deductible?
As long as the fees meet the criteria above, they should be tax deductible. That can help, for example, if business requires travel abroad and you incur foreign transaction fees for purchases made while traveling.
If you incur interest charges on business expenses charged to your card, those should be tax deductible too.
Do you have to have a business credit card?
It’s crucial to keep business and personal expenses separate — so whether you’re using a small business credit card or a consumer credit card, make sure to have a dedicated card for your business spending. If you mingle the two, that may disqualify you from deducting fees and interest when filing taxes.
Plus, keeping business and personal expenses on separate cards enables better recordkeeping, which will be important if you ever face an audit. And many business cards offer tools to help with recordkeeping, like downloadable purchase records and the ability to connect your card with popular bookkeeping software.
Choosing the right business card for you
It’s important to note that you shouldn’t necessarily open a business credit card with a high annual fee just because it might be tax deductible. You should still conduct a careful analysis to determine whether the rewards and benefits make the card worthwhile depending on what your business needs.
That said, it can make sense to pay an annual fee for a business card if you need certain premium benefits, such as the airport lounge access offered by the Business Platinum Card® from American Express. We’ll go over some options for business credit cards and help you pick the one that’s best for your situation.
The Business Platinum Card® from American Express
Best for: luxury travel benefits
The Business Platinum Card® from American Express has a $695 annual fee.
However, the card also comes with access to the American Express Global Lounge Collection®, which includes more than 1,400 airport lounges across 140 countries.
Plus, the card offers numerous credits, including:
- Up to $200 per year for baggage fees and more when you select one qualifying airline
- Up to $189 per year to go toward a CLEAR® membership (enrollment required)
- Up to $400 back per year on U.S. purchases with Dell Technologies (enrollment required)
- Up to $360 back per year for purchases with Indeed (enrollment required)
- Up to $150 back per year for select subscriptions with Adobe Creative Solutions (enrollment required)
- Up to $120 back per year for wireless telephone service purchases (enrollment required)
You can also earn a generous welcome offer: Earn 120,000 Membership Rewards® points after you spend $15,000 on eligible purchases with your Card within the first 3 months of Card Membership.
And there are valuable ongoing rewards: 5X Membership Rewards® points on flights and prepaid hotels on amextravel.com. Get 50% more Membership Rewards® points. That's an extra half point per dollar, on each eligible purchase of $5,000 or more.
To see rates & fees for The Business Platinum Card® from American Express please click here.
The Capital One Spark Cash Plus
Best for: no preset spending limit
The Capital One Spark Cash Plus has a $150 annual fee.
Where this card stands out is there’s no preset spending limit. Rather, how much you can charge to the card will adapt based on factors such as your purchase and payment history. This can be useful if you often find that you need flexibility to make large purchases.
But note that you can’t carry a balance on the Capital One Spark Cash Plus. You must pay your balance off in full every month, otherwise you’ll be charged a 2.99% monthly late fee.
There’s a two-tiered sign-up bonus: Earn up to a $1,000 cash bonus; $500 once you spend $5,000 in the first 3 months, and $500 once you spend $50,000 in the first 6 months of account opening.
And you earn flat-rate rewards at the rate of 2% cash back on every purchase; 5% cash back on hotels and rental cars booked through capital one travel.
The Ink Business Preferred® Credit Card
Best for: flexible rewards
The Ink Business Preferred® Credit Card, issued by Chase, has a $95 annual fee.
One of the main draws with this card is that it earns valuable Chase Ultimate Rewards® points. You’ll get 25% more value when redeeming your points for travel through the Chase Ultimate Rewards® portal, or you can transfer them at a 1:1 rate to the following airline and hotel partners:
- Aer Lingus AerClub
- Air Canada Aeroplan
- British Airways Executive Club
- Emirates Skywards
- Flying Blue Air France KLM
- Iberia Plus
- JetBlue TrueBlue
- Singapore Airlines KrisFlyer
- Southwest Airlines Rapid Rewards
- United MileagePlus
- Virgin Atlantic Flying Club
- IHG Rewards Club
- Marriott Bonvoy
- World of Hyatt
The Ink Business Preferred® Credit Card comes with a generous sign-up bonus: Earn 100,000 bonus points after you spend $15,000 on purchases in the first 3 months from account opening.
It also rewards spending in common business categories: Earn 3 points per $1 on the first $150,000 spent in combined purchases on travel, shipping purchases, Internet, cable and phone services, advertising purchases made with social media sites and search engines each account anniversary year. Earn 1 point per $1 on all other purchases—with no limit to the amount you can earn.