Is Credit Card Interest Tax Deductible? — CreditCards.com
- February 19, 2020
- By: Greenpath Financial Wellness
Excerpt from the CreditCards.com article on when you can write off credit card interest charges and when you can’t.
Featuring Jeff Arevalo, GreenPath Financial Expert
You may have run up hundreds or thousands of dollars in credit card interest charges in 2019, but don’t expect any relief from Uncle Sam as the new tax season rolls around.
Generally, the interest charges that rack up if you don’t pay your credit card bill off each month are considered “personal interest,” which hasn’t been deductible from income tax returns for more than three decades.
Before that time, any credit card interest you paid could be a tax write-off. But that deduction was eliminated when Congress passed the Tax Reform Act of 1986.
“There are not a lot of deductions for things considered personal items,” says Russell Schneidewind, lead tax research analyst for H&R Block’s Tax Institute.
However, it’s a different story in terms of credit card interest write-offs if you’re part of the gig economy or you’re self-employed.
And there are moves you can make this year to help reduce your credit card interest payments going forward.
How to reduce your credit card interest in 2020
There are ways you can reduce your credit card interest this year, including transferring a balance to a card with a 0% promotional APR.
“The hardest part is being able to qualify,” said Greenpath credit counselor Jeff Arevalo, because you usually need to have a solid credit score.
With a balance transfer, you transfer your credit card balances from a card with a higher interest rate to one with a 0% APR for a set period of time, such as 12 or 15 months.
But you’ll most likely have to pay a balance transfer fee, which is generally 3% to 5% of the balance transferred. And if you don’t pay the balance off within the set period of time, the interest rate will climb. The average minimum APR for balance transfer cards is 15.45% as of Feb. 12, 2020, according to the CreditCards.com Weekly Credit Card Rate Report.
You need to be sure “your budget is healthy enough to pay down the debt within the introductory period,” Arevalo says.
Applying for a new credit card also can affect your credit score, particularly if you apply for several cards within a short period of time, he says.
Click here to read the full article on CreditCards.com
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Jeff Arevalo is a Financial Wellness Expert and has been with the Greenpath since 2006. He possesses a strong passion for helping others and takes great pride in providing strong financial education and effective money management tools to help make a difference in people’s lives. Jeff and his wife recently welcomed a baby boy to their family and are excited to navigate the world of parenthood for the first time.