When are credit card purchases deductible?

We’ve heard a lot about red card purchases lately. But the question for some of us is this.red card Is my red card purchase deductible?

DID YOU KNOW?

If you use a bank credit card to pay for an otherwise tax deductible expenditure before the end of 2019, you can deduct that expenditure even if you do not pay the credit card bill until 2020.

ON THE OTHER HAND

If you use a retail store credit card to make an otherwise deductible expenditure before the end of 2019, that expenditure will be deductible only if you pay the credit card bill in 2019.

I know this sounds crazy. While there is a sound tax reason for this, the more important thing is to know the rules.

[Of course, all this assumes that you are on the cash basis. If you are on the accrual basis for income tax purposes, different rules apply.]

Call us if you have questions.

CIRCULAR 230 DISCLOSURE: To ensure compliance with the requirements imposed by the IRS, we inform you that, to the extent this communication addresses any tax matter, it was not written to be (and may not be) relied upon to (i) avoid tax-related penalties imposed under the Internal Revenue Code, or (ii) promote, market or recommend to another party any transaction or matter addressed herein. Likewise, nothing herein is intended to convey an expression of an opinion as to the likelihood a tax position would ultimately prevail if challenged by the IRS.