1. Challenges with Mixed Expenses
When personal and business expenses are mixed on the same credit card, it becomes nearly impossible to calculate the exact portion of interest attributable to business-related purchases
The CRA requires detailed records to substantiate your claim, and estimating interest without clear separation may lead to audits or rejected claims
2. Recommendation: Use a Separate Account
Open a separate credit card or account exclusively for self-employment expenses
This ensures all interest charges and purchases are clearly tied to your business activities, simplifying the calculation and documentation process
3. Why a Separate Account Matters
Simplifies Record-Keeping: Avoids confusion between personal and business expenses
Ensures Compliance: Reduces the risk of errors and CRA audits
Maximizes Deductions: Helps you accurately claim all eligible interest charges
4. How to Report Interest Charges
Include the interest charges for self-employment expenses on Form T2125 (Statement of Business or Professional Activities) under the "Other Expenses" section
Keep records, including credit card statements and receipts, to support your claim
Why This Matters
Accurately claiming credit card interest for self-employment purchases is vital to maximizing your deductions while staying compliant with CRA regulations. Using a separate account for business expenses eliminates guesswork and ensures peace of mind during tax season.