Using Personal Credit Card for Business Expenses & Vice Versa

man hand holding credit card and write on notebook

If you happen to’ve lately begun a brand new enterprise, you might be questioning one of the best ways to pay for enterprise bills. We regularly see folks asking if it’s okay to make use of a private credit card for enterprise bills – and conversely if utilizing an enterprise credit card for private use is okay. Let’s dive in and discover the subject.

Business & Personal Expenses: Greatest Practices

Initially, it’s good to know one vital reality:

Business and private bills ought to at all times be saved as separate as potential.

This means, ideally, you’ll have a separate credit card, AND a separate checking account for your small business, along with your present private accounts.

In brief, it’s best to:

  • Maintain enterprise bills separate from private bills
  • Maintain excellent data of all enterprise bills
  • Maintain bodily receipts for enterprise bills
  • Use totally different accounts for enterprise & private bills

Whereas the above is the very best practice for mixing enterprise & private purchases, not everybody will observe these pointers. If you happen to select to not utterly separate enterprise and private bills, hold studying the sections under for some often requested questions.

Read More: Can You Build Credit Without A Credit Card?

Using Personal Credit Card for Business Expenses

Can I take advantage of a private credit card for enterprise bills? 

We don’t suggest it, however, it’s potential to make use of a private credit card for enterprise purchases. This would possibly make sense in the event you’re simply beginning out with your small business. Within the long run, although, you’ll undoubtedly need to get a devoted enterprise credit card to maintain issues separately.

Can I pay a private credit card with an enterprise checking account? 

In case you have an enterprise checking account arranged, however, don’t have an enterprise credit card, there are a pair choices. One is to simply use your small business debit card, which can draw funds instantly from your small business checking. The opposite is to make use of a private credit card and pay off these expenses from your small business checking. We suggest simply utilizing the enterprise debit, though it’s technically potential to pay your private credit card from an enterprise account.

Issues to notice: 

  • You’ll must hold very detailed data to keep away from points with bookkeeping and taxes
  • It’s finest to make use of a separate credit card for all enterprise purchases. So in case you have 2 private credit playing cards, begin utilizing one completely for enterprise and one for private. This lets you have a “business” credit card with out really making use of for a separate card.

Using Business Credit Card for Personal Use

Using Personal Credit Card for Business Expenses

Can I take advantage of an enterprise credit card for private bills? 

We don’t suggest it, however, it’s potential. In case you have an outdated enterprise card that’s now not used for enterprise bills, it’s okay to make use of it by yourself with private bills. Nonetheless, attempt to not combine the 2 – and hold detailed data of the whole lot. It’s additionally finest to pay off the fees out of your private account, quite than an enterprise checking account.

Is it unlawful to make use of an enterprise credit card for private use?

It’s not unlawful, as long as you don’t do any sketchy bookkeeping or attempt to declare private bills as enterprise bills. With that stated, it may be towards the phrases and situations of your card settlement, so it may trigger points with the financial institution/card issuer who gave you the enterprise card.

Can I take advantage of my enterprise debit card for private bills? 

It’s a nasty thought to make use of an enterprise DEBIT card for private bills. Cash is instantly drawn out of your small business checking, making a muddy bookkeeping scenario. With an enterprise credit card, it’s a little bit totally different, as you may pay it off from a private account.

Issues to notice: 

  • Business playing cards aren’t coated by the identical client protections as private playing cards.
  • It’s not unlawful to make use of enterprise playing cards for private use, however the card issuer may shut your account in the event that they needed to. Business playing cards are meant for use solely for enterprise purchases, so far as the card issuer is worried.
  • Credit reporting is totally different for enterprise playing cards. See this information for particulars
  • Detailed bookkeeping is at all times vital, however it’s completely important in the event you’re mixing private and enterprise bills on the identical account.

Tax Implications 

Observe: I’m not a CPA. Converse together with your accountant in case you have tax questions.

Are enterprise credit card rewards taxable?

Right here’s the place this could get sticky: credit card rewards aren’t typically thought of as taxable revenue – however enterprise credit card rewards are handled otherwise. With enterprise bills, the rewards you earn aren’t taxable revenue, however, they do decrease the price of the merchandise and due to this fact the deduction you may take. So in the event, you make a $1000 enterprise buy and earn $50 in rewards, technically it’s best to declare an enterprise expense of $950. So, this could get bizarre when bills are blended. Learn this text and speak to your tax adviser in case you have questions.

Can I take advantage of enterprise credit card rewards for private use?

In case you have accrued rewards on an enterprise credit card, there’s typically no problem with utilizing these rewards for a private journey. Nonetheless, seek the advice of together with your tax adviser concerning the tax implications of doing so.

Read More: Quicksilver Vs Platinum Credit Card

Remaining Ideas

Backside line: it’s finest to not combine private and enterprise bills.

It’s comprehensible to need to hold issues easy through the use of your present private accounts for your small business purchases. Nonetheless, in the long term, it’s really much more easy and clear to get utterly separate accounts.

Lastly, we suggest chatting with a certified tax skilled in case you have any questions.

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