1. What is Credit Card Interest?

Credit card interest is the charge you pay for borrowing money from the credit card issuer. For business or investment-related expenses, this interest may be tax deductible in certain situations.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( I \) — Monthly interest charge ($)
• \( P \) — Principal balance ($)
• \( R \) — Monthly interest rate (APR / 12)

Explanation: The calculator converts annual APR to monthly rate by dividing by 12, then multiplies by your principal balance to find the monthly interest charge.

3. Tax Deductibility of Credit Card Interest

Details: In some cases, credit card interest may be deductible if the charges were for business expenses, investment activities, or certain educational expenses. Consult a tax professional for advice specific to your situation.

4. Using the Calculator

Tips: Enter your current credit card balance and the annual percentage rate (APR). The calculator will show your estimated monthly interest charge that might be tax deductible.

5. Frequently Asked Questions (FAQ)

Q1: Is all credit card interest tax deductible?
A: No, only interest on charges for qualified business, investment, or certain educational expenses may be deductible. Personal expenses don't qualify.

Q2: How do I prove the interest is deductible?
A: Maintain detailed records showing the connection between the charges and deductible activities.

Q3: What if I make partial payments?
A: The calculator assumes the full principal balance remains unpaid. For more complex scenarios, consult an accountant.

Q4: Does this calculator account for compounding interest?
A: No, it calculates simple monthly interest. Actual credit card interest may compound daily.

Q5: Where would I deduct this on my tax return?
A: Business interest would typically go on Schedule C, investment interest on Schedule A (subject to limitations).