Why You May Need a Business Credit Card… Even If You Don't Run a Business

With the explosion of opportunities to make money online, even cubicle commandos might earn a little self-employment income. If you want to keep as much of that income as possible, you need to track the expenses that helped you acquire it. No, you can’t deduct the cost of the expensive eye cream that made you look good for your blog’s head shot. You can, however, deduct ordinary and necessary expenses which are aimed primarily at supporting your business and not your personal life.

Maybe you’ll start by making a bit of money from advertising on your blog or by taking on occasional freelance work. Because the web has made it so convenient to raise your professional profile online, a little bit of work like that can lead over time to more and more outside work or even to full-time self employment. Meanwhile, you’ll be so busy working that you won’t want to hassle any more than you have to with managing and tracking your expenses. Enter the small business credit card.

A business credit card separate from your personal one will provide detailed reports of purchases you made during specific time periods, for example quarterly or yearly. This can be extremely helpful in organizing your deductions at tax time, which comes four times a year not just once if you are subject to paying estimated taxes. You could create a Google Spreadsheet to maintain your own list of transactions, but why spend the time, if someone else will do it for you?

Even if you do use a business credit card, you must still retain your receipts: get a receipt for every printer cartridge, for each taxi ride you take while attending a conference, for your monthly web hosting cost, and for any other reasonable purchases you make in support of your self-employment earnings. If you use some of your equipment and supplies for both personal and business use, keep a log of that use for at least a month so you can prorate your deduction for that expense at tax time.

Just like in the personal credit card space, there are a seemingly infinite number of business credit cards. Take some time to choose carefully, then make sure you use that card every time you buy something for your business–and switch all your online accounts for business-related purchases such as web backups to using that card.

When it’s time for you to report your income and expenses to the IRS, you’ll be glad to have itemized lists of expenditures along with yet one more piece of evidence that you are not just a hobbyist in the new economy. For more about self-employment taxes, see our post Six Things You Must Know About Self-Employment Taxes.

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