According to Wallet Hub, the median credit card debt is now $2,260. This is up from 2020 in the peak of COVID and is for consumer credit cards. So are we as business owners incurring credit card debt also?
I always find it important to remind business owners that your credit card payments are not tax deductible. The expenses you incurr and charge to your credit card, those may your business income tax deductions. Those deductions are allowed on the date that the charge is incurred or the item you purchased is placed in service. Interest charged on your credit card may also be deductible. If you are at all unclear about how using a credit card, incurring charges and or making payments affects your business income tax deductions, please consult your tax advisor. I have often had business owners be horribly surprised at year end when they assume they have no taxable income because they paid off their credit card balances but I make the tax adjustments and they do in fact owe taxes. Be sure to review your credit card balances, expenses and payments before year end.
As with all things money and business, in my opinion, cash is more important than taxes. By this I mean that I would prefer you not create credit card debt to get tax deductions because you are spending cash. I would prefer that you buy only what you can afford and if your business truely needs to buy something that you don’t have the cash available for, then let’s discuss financing options. Credit cards can be our best friend or worst enemy.
I would love to continue the credit card discussion with you. Reach out to me anytime!