Is credit card interest tax deductible?

What to know if you’re carrying a credit card balance -- and if the interest you're paying is tax-deductible. (iStock)

Nearly half of Americans who have credit cards (47 percent) don’t pay off their balance in full each month, NerdWallet’s 2019 Consumer Credit Card Report found. Similarly, a recent survey by real estate data company Clever also found that 47 percent of credit card users carry a balance from month to month.

Anyone who has carried a credit card balance knows that credit card companies charge interest when users don't pay off their full balance each month. These fees can be substantial, depending on a card’s interest rate; the average credit card interest rate recently hit 17.35 percent, according to’s weekly rate tracker.

Wondering whether credit card interest is tax-deductible? Here’s what you need to know.

Most credit card interest is not tax-deductible

For consumer debt, “credit card interest is considered personal interest by the IRS and has not been tax-deductible since the 1980s,” lamented Lisa Greene-Lewis, CPA and tax expert at TurboTax. For that matter, “installment interest for any personal expenses [is] not tax-deductible,” Greene-Lewis added.


Baby boomers may remember that consumers used to be able to deduct credit card interest on their tax returns. That changed, though, when the federal government passed the Tax Reform Act of 1986, which eliminated personal credit card interest as a deductible expense.

Business credit card interest is deductible

Self-employed workers can deduct their business credit card interest as a business expense, on their Schedule C, to reduce their taxable income, Greene-Lewis said. (Farmers can claim it on their Schedule F form.) In addition, “gig workers, like shared-ride drivers, as well as those who sell items online or at local markets, can claim [credit card] interest on purchases for their business needs,” said Mark Steber, chief tax officer at Jackson Hewitt.

Steber recommended that self-employed workers have a credit card that’s strictly for business use and separate credit cards for personal purchases. “This makes it easy to track deductible credit card interest” and business-related purchases, he explained.

“Credit card fees, while not credit card interest, may also be deductible when the credit card is being used for business-related expenses,” Steber added.


What other types of interest are tax-deductible?

Greene-Lewis said tax filers should keep in mind that there are other forms of interest that are tax-deductible:

  • Student loan interest - Deductible up to $2,500 in interest payments.
  • Mortgage interest - Interest is deductible on up to $750,000 for loans taken out after December 15, 2017 (up to $1,000,000 for loans issued before December 16, 2017).
  • Home Equity Line of Credit (HELOC) interest - The caveat? HELOC interest is only deductible if the loan was secured by the homeowner’s mortgage and was used to buy, build, or improve their home, Greene-Lewis said.
  • Mortgage points paid to secure the home loan - One mortgage point typically costs 1 percent of the loan amount. For example, 1 point on a $300,000 mortgage would equal $3,000.
  • Interest for money borrowed for property held as an investment - For instance, interest payments for a loan of a rental property may qualify.

Smart ways to pay less in credit card interest

Credit card users who are carrying a balance from month-to-month can save money by implementing one of these strategies:

  • Ask for a lower interest rate - Credit card companies may be willing to reduce a customer’s interest rate if the person’s income has increased or their credit score has improved since they first opened their account.
  • Apply for a balance transfer card - Transferring high-interest credit card debt to a balance transfer credit card that offers a low or zero percent introductory rate is a smart move. Note, however, that most balance transfer credit cards charge an upfront balance transfer fee of typically 3 percent to 5 percent of the transfer amount.
  • Consult a credit counselor - A credit-counseling agency may be able to negotiate lower interest rates and payments.