Filing Schedule C with Business Credit Card Expenses
Every year business owners have the opportunity to receive tax deductions for all their business expenses incurred during the fiscal year. Most business owners usually file deductions for items such as office equipment, business loans, and employee salaries and benefits.
Most people don’t realize that they can receive a tax deduction for the interest paid on their business credit card throughout the year, but with Schedule C and the right information it is certainly possible. The following can help anyone properly classify and file their Schedule C deduction in order to minimize taxes and improve financial decision making in the following fiscal year.
What is Schedule C?
The form on which tax deductions pertaining to a small business are filed is called a Schedule C. There are five important sections within a Schedule C, including Income, Expenses, Cost of Goods Sold, Vehicle Information, and Other Expenses.
• The Income section of a Schedule C is where the business owner lists the gross income of the business during the fiscal year.
• The Expenses section is simply a list of expenses incurred in the operation of the business.
• The Cost of Goods Sold section pertains only to goods that were purchased for the sole intent of profiting, which can include items used to create or ship products.
• The Vehicle Information section allows business owners to deduct the cost of operating a business vehicle.
• The Other Expenses section is for miscellaneous, non-categorized expenses, and this is where credit card expenses would be listed.
How to List Business Credit Card Expenses
All credit card interest charged to a business credit card can be deducted in Part V of Schedule C. Exactly how much interest was charged during the fiscal year can be obtained from the credit card company upon request, or can be located on the yearly statement. It is important to make sure the numbers on Schedule C are accurate, as inaccurate information could lead to stressful tax audits.
Purchasing Items with a Business Credit Card
Aside from the interest paid on a business credit card it is also possible to receive a tax deduction for all expenses incurred for the business. The best way to separate the expenses incurred for the business from regular expenses is to keep all purchases for the business on a separate credit card. All purchases made with the business credit card should qualify for a tax deduction in Part II or Part III of Schedule C, as long as the items purchased pertained to the business. This also assists in managing the business budget and with financial planning for the next fiscal year.