The deductibility of business credit card payments depends on what kind of credit card charges the payments are covering. If only some of the credit card charges are deductible, then only the portion of the payment relating to the deductible expenses can be included on the tax return.
The IRS lets you deduct “ordinary and necessary” expenses for your business, whether paid by cash or credit card. Expenses are considered ordinary and necessary if they are typical for the industry and helpful and appropriate for the trade or business that you are in.
Key takeaways:
- Specifically for credit card business expenses, both cash-basis and accrual taxpayers deduct expenses when the expense is charged, not when the credit card bill is paid.
- Interest expense and credit card processing fees are deductible for tax purposes.
- Credit card charges have no effect on the timing of expenses for accrual-basis taxpayers since they would already be deductible when the obligation to pay is established.
Timing of credit card expense deduction
The IRS considers an expense deductible in the tax year in which it is incurred, not when the payment is made to the credit card company. This means that once a business makes a purchase using a credit card, it can claim the deduction on that year’s tax return, even if the bill is paid in a subsequent tax year. For cash-basis taxpayers, this is an exception to the general rule that only allows expenses when cash is paid.
For example, if a cash-basis business owner purchases office equipment with a credit card on December 20, 2025, but pays off the credit card balance in January 2026, the deduction must be claimed on the tax return for 2025.
Does your accounting method impact the deduction?
The previous example shows how a credit card expense would be deducted on the tax return of a cash-basis taxpayer. An accrual-basis taxpayer also deducts credit card expenses in the tax year when the expense is incurred, not when the credit card payment is made.
However, unlike a cash-basis taxpayer, for accrual-basis taxpayers, the general standard for all expense deductions is to take the deduction when the expenses are incurred as opposed to when they are paid for.
This treatment corresponds with the basic tax principle of economic performance, which identifies an expense as deductible when the obligation to pay is finalized. This rule applies to both cash- and accrual-basis taxpayers, but it is especially relevant to cash-basis taxpayers who might otherwise think they must wait until the credit card bill is paid.
Sample deductible business credit card expenses
Business owners can deduct a variety of expenses charged to their business credit cards, including the following:
1. Office and computer equipment
- Computers, printers, and office furniture
- Software and online subscription services
2. Travel and entertainment
- Airfare, lodging, and transportation
- Meals with clients and business-related entertainment (subject to the 50% deduction rule)
3. Marketing and advertising
- Online advertising, business website expenses, and social media promotions
- Print ads and sponsorships
4. Professional services
- Legal and accounting fees
- Consulting and business coaching expenses
5. Utilities and freight
- Business phone lines, internet service
- Postage and shipping costs
For a more extensive list of deductible business expenses, review our list of the IRS business expense categories.
Timing of expense deduction vs related interest and fees
In addition to the actual credit card expense deduction, the related interest expense is also deductible. The expense is deducted when it is incurred, but the related interest expense isn’t deductible until paid.
For example, let’s assume that the owner of Eddie’s Electric Services purchased supplies on his credit card in December of 2025 and paid the credit card bill in January of 2026. Eddie’s Electric was entitled to the expense deduction in 2025, not in 2026. However, the accumulated interest expense related to the supply was not deductible until the 2025 bill was paid in 2026.
Processing fees, balance transfer fees, and other financing costs related to business expenses are subject to the same treatment as interest expense.
Exceptions and limitations
While most business-related expenses charged to a credit card are deductible, some limitations and exceptions apply:
- Personal expenses: Any personal charges on a business credit card are not deductible.
- Capital expenditures: Large purchases (e.g., real estate, vehicles, equipment) may need to be depreciated over time rather than deducted immediately.
- Non-deductible expenses: Fines, penalties, and membership dues (e.g., country club fees) are not deductible. Find more examples of expenses that can’t be deducted by reading our article on nondeductible business expenses.
- Interest on business credit cards: Interest paid on a business credit card is deductible, but personal credit card interest is not.
Best practices for record maintenance
For proper tax reporting and compliance, businesses should follow the best practices for the maintenance of records:
- Properly categorize expenses: Use accounting software to track and categorize expenses correctly
- Keep receipts and statements: Keep copies of receipts and match them with credit card statements to substantiate deductions.
- Separate business and personal expenses: Avoid using personal credit cards for business expenses to prevent complications.
- Know when to ask for help: A tax professional can help suggest deductions that you may not think of and can help you correctly classify your expenses.
Bottom line
Business credit card payments are only deductible for tax purposes to the extent that the underlying charges are deductible. In addition to the charges being deductible, the expense should be deducted when incurred, not when it is paid, irrespective of the taxpayer’s accounting method. The taxpayer’s records should support the nature and timing of the expense deducted.
Frequently Asked Questions (FAQs)
Business expenses made using a credit card are deductible. Related financing expenses such as interest are also deductible but may need to be deducted in different tax years. It’s possible that only part of a credit card payment may be deductible if it includes personal expenses.
Yes. Business credit card interest is deductible for tax purposes.
If a card is used for both personal and business expenses, the taxpayer must clearly identify which expenses are personal and which are for business prior to filing their tax return.
Yes. Payment processing fees are considered an ordinary and necessary cost of doing business.
