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Really awkward situation with credit card used for both personal and investment purchases

Discussion in 'Accounting & Tax' started by doubletoplei, 15th Jun, 2016.

  1. doubletoplei

    doubletoplei Well-Known Member

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    Following Terry's tip on using credit card for investment without mixing the purpose: I have a CC that was used for personal items. Spent say $2000 on it, paid $2000 back to the card to bring the balance back to $0 before I used it for investment purchases and in the hope that I can refinance the investment purchases with my upcoming IP loan and keep those deductible.

    Weird thing happened this morning that one previous personal transaction of $10 (part of the $2000 personal spending) was not collected and suddenly my account balance is +$10 rather than $0. I have never had a moment before of disliking the extra $10 that much .

    Would this situation affect the deductibility of my investment purchases?
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    It sounds like it is in positive balance so no real effect.
     
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  3. doubletoplei

    doubletoplei Well-Known Member

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    Hi Terry,
    Thanks very much for your prompt help. I remembered your post on bring the balance back to $0 to avoid the mixing and confusions of refinancing from an investment purpose loan. Under the situation described above, say I plan to purchase an investment-related item for $100 and later refinance it to the IP loan so the interest on the $100 will be deductible. Since my balance on the cc is +$10, if I made the investment purchase, the balance will become -$90. If I then pay off the CC using borrowed money, I only need to pay $90 back. So, how much exactly am I eligible for deduction? $90 (as this would be the amount I refinanced) or $100 (as this is the actual investment cost)?
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    It would be the interest on the $90
     
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  5. Elives

    Elives Well-Known Member

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    i thought it was ok to use same account / credit card as long as you weren't claiming the interest?
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    yes - but not if you are trying to refinance the debt.
     
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  7. doubletoplei

    doubletoplei Well-Known Member

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    Thanks very much Terry, all clear now.