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Credit Cards are not all alike for tax deductions
CREDIT CARDS ARE NOT ALL ALIKE FOR TAX DEDUCTIONS
You have probably often heard that if you charge
something on a credit card it is deductible in the year
you charge it, not the year you pay the bill. That is
almost true, but it has an exception that can leave you
stuck. Credit cards are not all the same under the tax
rules.
The general rule is that you only get a tax
deduction in the year you actually pay for a deductible
expense. But there's normally an exception when you
pay with a credit card, as for tax purposes, payment is
considered made on the date of the transaction, not on
the date you pay the credit card company. Lots of tax
advice publications tell you this.
What many of them forget to tell you is that there
is a critical exception to the exception. If you
charge a deductible expense on a credit card issued by
the company supplying the deductible goods or services,
you can't take a deduction until the credit card bill
is paid. If you use the store credit card for your
office supplies, or your personal prescription, you
can't deduct it until you pay. But if you use your
Visa card you can take the deduction immediately. Keep
this in mind near the end of the year, when you may
want to choose which card you use based on which year
you want the tax deduction to be in.
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