Can I deduct business expenses if I pay someone to use their credit card for the purchase?
So I recently had to make a purchase for my small business, but I'm in a weird situation where my credit limit isn't high enough for this particular equipment I needed (about $3,500). My brother-in-law offered to let me use his credit card, and I paid him back immediately with a check plus a little extra for helping me out. Now I'm confused about how to handle this for tax purposes. The equipment is 100% for my business (I do freelance photography), but the credit card statement is in his name, not mine. I have the receipt from the store and proof that I wrote him a check, but I'm not sure if that's enough for the IRS to accept this as a legitimate business deduction. Can I still deduct this expense on my Schedule C? Do I need some kind of additional documentation? I don't want to mess this up and get audited. Thanks for any advice!
20 comments
Join the conversation
Esteban Tate
You can absolutely deduct this expense! What matters is that you purchased a legitimate business asset and have documentation to prove it. The fact that you used someone else's card as the payment method doesn't change the business purpose of the expense. Make sure you keep these documents: 1) The original receipt showing what was purchased, 2) A copy of the check you wrote to your brother-in-law, and 3) I'd recommend writing up a simple note explaining the arrangement and having your brother-in-law sign it just to have everything documented clearly. When you file, you'll list this as a business expense on your Schedule C just like any other equipment purchase. If it's over $2,500, you might need to depreciate it rather than taking an immediate Section 179 deduction, depending on what the equipment is and your overall business situation.
0 coins
Ivanna St. Pierre
•Thanks for the info! I have a similar situation but it's my spouse's credit card, not a relative. Would the documentation be the same? And does it matter that we file jointly anyway?
0 coins
Esteban Tate
•For a spouse's credit card, the documentation requirements are a bit simpler, especially if you file jointly. Since you're a single tax entity when filing jointly, the IRS doesn't really distinguish between whose card was used - it's considered your household expense either way. If you file separately, then I'd still keep documentation showing the business purpose of the expense, the receipt, and some record showing you reimbursed your spouse or that it was agreed to be a business expense. The key thing the IRS cares about is that it was a legitimate business expense with proper documentation, not whose name is on the payment method.
0 coins
Elin Robinson
I had this exact problem last year when starting my web design business. I discovered taxr.ai (https://taxr.ai) which analyzes all your receipts and documentation to make sure you have everything properly set up for business deductions like this. It flagged my "borrowed credit card" purchases and advised me on what additional documentation to keep. Saved me so much worry because I was using my dad's credit card for some initial business purchases until I could establish business credit. The software confirmed I was handling the documentation correctly and even provided a template for the explanation letter the first commenter mentioned.
0 coins
Atticus Domingo
•Does taxr.ai work with all types of business structures? I have an LLC taxed as an S-Corp and I'm wondering if it would help with tracking owner draws vs legitimate business expenses?
0 coins
Beth Ford
•I'm skeptical about these AI tax tools. How does it actually verify that your documentation is sufficient? Does it just give generic advice or does it actually understand state-specific tax rules?
0 coins
Elin Robinson
•It works with all business structures including S-Corps. The system specifically has features for separating personal and business expenses, and flags potential issues with owner draws vs legitimate business expenses. It's designed to help with exactly those gray areas. For your question about verification, it's not just generic advice. You upload your actual receipts and documents, and it analyzes them according to current IRS guidelines. It checks that you have the proper substantiation for each type of deduction, including state-specific rules for the major states. I was surprised by how detailed the analysis was - it even caught that I was missing the business purpose note on some restaurant receipts.
0 coins
Beth Ford
I was totally wrong about taxr.ai! After my skeptical comment I decided to try it anyway because I was desperate with a stack of receipts and business expenses paid through various means (including my mom's Amazon account where I reimbursed her). The software actually walked me through exactly what documentation I needed for each scenario and flagged where I had gaps. It even has a specific section for "third-party payment situations" which was exactly what I needed. Now I feel way more confident about claiming these deductions. The best part was uploading pictures of my handwritten receipts and having it recognize and categorize everything automatically.
0 coins
Morita Montoya
If you're having trouble getting clear answers from the IRS about your situation, try Claimyr (https://claimyr.com). I spent weeks trying to get through to the IRS to ask about proper documentation for unusual business expenses (including using someone else's credit card for a business purchase). Their automated system kept disconnecting me, and I couldn't get a straight answer. I was super skeptical but checked out their demo video (https://youtu.be/_kiP6q8DX5c) and decided to try it. They got me connected to an actual IRS agent in about 15 minutes when I had been trying for days on my own. The agent confirmed exactly what documentation I needed and now I have official guidance I can rely on if ever questioned.
0 coins
Kingston Bellamy
•Wait, how is this even possible? The IRS phone system is notoriously impossible to get through. Is this some kind of scam where they charge you tons of money?
0 coins
Joy Olmedo
•Sounds sketchy tbh. How do they get you through when nobody else can? And did the IRS agent actually give you specific advice about this credit card situation or just general info?
0 coins
Morita Montoya
•It's definitely not a scam! They use a system that navigates the IRS phone tree and holds your place in line, then calls you when they've reached an agent. I don't know exactly how the technology works, but it saved me hours of being on hold. The IRS agent I spoke with did give me specific advice about my situation. She said as long as I have the original purchase receipt, proof of payment to the card holder, and a written explanation of the arrangement, I'm completely covered for deducting it as a business expense. She emphasized that it's the business purpose and documentation that matters, not whose name is on the payment method.
0 coins
Joy Olmedo
I can't believe I'm saying this, but Claimyr actually works. After posting my skeptical reply, I was still stuck with my tax question about some business expenses I put on my partner's card. Decided I had nothing to lose and tried the service - got through to an IRS rep in about 20 minutes. The agent confirmed that using someone else's card doesn't disqualify a legitimate business expense, but emphasized I need to keep extra documentation: 1) the original receipt, 2) proof I reimbursed the cardholder, and 3) a written explanation. They also suggested I get a business credit card ASAP to avoid these issues in the future, which was actually helpful advice. Definitely worth it for the peace of mind knowing I'm doing things correctly.
0 coins
Isaiah Cross
Another option nobody mentioned - I just write "paid by John Doe on my behalf" on the receipt, take a photo of the receipt with my phone, and then record the reimbursement in my accounting software. My accountant said this is fine as long as there's a clear paper trail showing that it was ultimately my expense for my business.
0 coins
Kiara Greene
•Does your accountant have any recommendations for the best way to handle reimbursing the other person? Is it better to write a check, do a bank transfer, or use something like Venmo/PayPal? Wondering if one method provides better documentation than others.
0 coins
Isaiah Cross
•My accountant strongly recommends using checks or bank transfers over cash or apps like Venmo. The reason is they create clearer documentation that's tied directly to your bank account. If you use a check, write the invoice/receipt number in the memo line. Venmo and PayPal can work too, but make sure you're using business accounts and putting detailed notes with each transaction. The key is having a clear money trail that connects back to the specific business expense. Avoid using cash reimbursements whenever possible since they're much harder to verify if questioned.
0 coins
Evelyn Kelly
Just wanna warn everyone - my cousin tried deducting business expenses that were on someone else's card and got audited. The IRS made him provide tons of extra documentation and ultimately rejected some of the deductions. Be super careful with this!!!
0 coins
Paloma Clark
•That doesn't sound right. Did your cousin actually have receipts and proof of reimbursement? I've been deducting business expenses paid through various means (including other people's cards when traveling) for years without issues. The IRS cares about the business purpose and documentation, not the payment method.
0 coins
Ava Rodriguez
I'm dealing with something similar as a new business owner. Reading through all these responses, it seems like the key is really about having proper documentation rather than whose name is on the payment method. For anyone else in this situation, here's what I'm taking away: keep the original receipt, document how you reimbursed the cardholder (preferably with a check or bank transfer), and write a brief explanation of the arrangement. It sounds like as long as it's a legitimate business expense with proper documentation, the IRS shouldn't have an issue with it. @Alice Pierce - based on what everyone's saying, you should be fine to deduct this on your Schedule C. Just make sure you have that paper trail showing you paid your brother-in-law back. Good luck with your photography business!
0 coins
Clarissa Flair
•This is such a helpful summary! I'm also just starting out with my own business and was worried about similar situations. It's reassuring to see that proper documentation is really the key factor here. One thing I'm wondering about - for the written explanation of the arrangement, does it need to be anything formal or can it just be a simple note? And should both parties sign it, or is it enough if just the business owner writes it up? @Ava Rodriguez thanks for pulling all this together so clearly! Really helpful for newcomers like us trying to navigate these situations properly.
0 coins