Americans will pay $122 billion in credit card interest this year.

That’s a lot of bread! Given the amount of our income we give to Uncle Sam, it would be nice if the interest we paid on our loans were also deductable from our taxes.

The Tax Reform Act of 1986, however, eliminated deductions on credit card interest, as it is “personal interest.”

Is credit card interest tax deductible? Are there any instances where interests paid on credit card loans can be considered tax write-offs?

The answer is yes. Let’s take a look at some examples.

1. You Own A Home

If you own a home, you will be able to convert non-deductable credit card interest into a tax-deductible expense in certain cases.

You can make your mortgage payments on your primary residence using your credit card, and then deduct your interest.

Keep in mind that you may only deduct interest on up to $750,000 worth of qualified residential loans. There is a limit of $375,000 worth of loans if you are married but filing separately.

You may also deduct interest paid on money that is borrowed to purchase an investment property. If you own a home and use it solely as a rental property, you can deduct all ordinary and necessary expenses, including mortgage interest.

It is also possible to take out a home equity loan in order to pay off your credit cards. You are permitted to deduct interest on a home equity loan.

This could benefit you in the long run, since home equity loans have a lower interest rate. You will want to be certain, however, that you can pay off the loan since your house is on the line if you don’t.

2. You Have Student Loans

Any interest that you incur on student loan payments with your credit card is tax-deductible. You are limited, however, to $2,500 of the amount you paid as an adjustment to your gross income.

3. You Own A Business

If you own your own business, you are allowed to any interest in charges used to pay for business expenses. These charges must be related to your trade. The deduction also applies to any finance charges, late fees, foreign transaction charges, or annual credit card fees pertaining to your business expenses.

In order to be eligible for the deduction, you and the lender must be in a true credit-debtor relationship where you intend to repay the funds. If you are not liable for the full amount, you can only deduct what is attributable to your portion.

Business expenses may include office rent, equipment, supplies, business utility costs, and accounting services.

Personal expenses, such as auto loans, utilities, or food, are not eligible for the deduction. Credit card interest accrued on business expenses will not apply to personal expenses, even if they are on the same account. In order to keep your records straight, it is a good idea to have separate credit cards for personal and business expenses.

Is Credit Card Interest Tax Deductible?

Is credit card interest tax deductible? If you use it to pay your mortgage, finance business expenses, or pay off student loans, you might be able to take advantage of a great tax break.

For more information on small businesses, read our blog today.