Straight From the CPA: Freelancers Need Credit Cards

I’ve recommended credit cards in the past as a simple way to manage freelancing expenses. I got the chance to interview the CPA who I send my taxes to, Travis Raml, for another article not too long ago and something he said stuck with me.

Travis explained that you can actually minimize your taxes for 2009 with a credit card: “One of the easiest ways to minimize taxes is expense acceleration. Most small business owners are on the cash basis of accounting and thus can deduct expenses when paid. So with the year’s end on the horizon, if you have expenses you know you’re going to pay in the next month or so, it’s probably sensible to make the purchase or payment now versus waiting until the next calender year.”

You can put those expenses on your business credit card now and get the tax deduction for 2009. Travis added, “…if you pay via credit card the expense is deductible in the year the purchase is made, not when you make the payment to the credit card company. This strategy can also be used billing clients as you only record the income when the cash is received. If you delay billing clients for a couple weeks towards the end of the year, it is more likely the payment will not come in until January or February at which point it would become taxable the next calender year.”

Of course, you’ll want to talk to your own tax preparer to make sure that you handle your taxes appropriately, but with just a few days until 2010, it may be worth taking a look at any expenses you’re expecting for January.


  1. John Wang   •  

    I’m actually in the process of trying to find a business credit card myself. Beyond the actual tax deduction benefits, I really just want it to simplify separation of personal and business expenses. Specifically the same reason why I keep my business and personal bank accounts separate as well.

    Since I did set up as an LLC, it has been a bit harder as my LLC has no credit history and as such is easy to get rejected on Credit Card applications. Do you have any suggestions on that? I’ve currently tried to go for Chase’s Amazon Business Visa and got rejected and am now waiting to hear back from American Express’ Costco Business card.

  2. thursday   •     Author

    @John, I went with the fairly low-limit card available to just about anyone who opens a checking account with Bank of America (that’s where I do all of my business banking). I’ve also seen a lot of people have success getting a PayPal Visa for their businesses, especially if they handle a lot of payments through PayPal.

    It is necessary to build up some credit for a business, and I’m a big believer in doing so before you actually need a lot of credit — say when you want to expand. It may be worth taking a card with poorer terms in the short run and asking for improved rates down the road.

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