This is an audit magnet.
The short answer is ”You don’t. You use separate cards.”
And I think you know that. And the IRS is going to take that viewpoint: “What the heck are you doing here!!!???”
It’s all about what you can justify to the IRS.
Suppose you carry $20,000, charge $1000 of company stuff and $1000 of personal stuff. And then you make a card payment of $1000. It paid off something, arresting the interest on that... but how do you apportion it?
Whatever you claim, you will have to be ready to defend it to the IRS in an audit. And they can be pretty arbitrary on mucky stuff like this. That’s why you don’t let your accounting books be mucky.
Your books should be separate anyway
The business should have a whole separate set of accounting books anyway - for income and expenses, assets and liabilities (debt).
Understand that in accounting, there’s a difference between a bookkeeping account (say 6001 Sales Income) and a bank account (Wells Fargo 123456789).
It’s perfectly possible for accounting accounts to reflect money that is physically mixed in a bank account. That’s not a deal-breaker. Since you’re a proprietorship/partnership, IRS doesn’t really care if the bank and credit accounts are commingled.
But it’s a bad idea.
You could fix this with impeccable bookkeeping (i.e. accurate recording of transactions which already occurred, which frankly, is what all bookkeeping is). But you’ll need to be really, really into bookkeeping to pull it off.
You need to have a set of accounting books that list every occurrence of income and expense. Sales 6/5 $46.00 .... purchase mix of T-shirts 6/8 $461.00. One of your expense items will be interest. Yu have to position yourselves (personally) as “the bank” loaning money to the business, and charging the business interest day by day, at the same rate the card charges you.
Every business also has assets (inventory of T-shirts $844.14; cash attributable to business $2311.80) and liabilities (credit card debt $1941.00). Notice the part where the business has both cash and debt.
So from time to time the business has to take some of its “cash attributable to business” and pay down its loan (in theory “from you”). That payment is actually 2 payments:
- it’s an interest payment that is mandatory, and that posts as an expense, i.e. as a monthly payout. This is a total loss to the business; it’s money gone.
- And a principal payment which changes the amount owed, and that posts as a change in assets/liabilities. (Both at once, since you’re paying it out of assets, but reducing liabilities, so on the balance sheet, it’s a net change of zero.)
Now if your head is spinning right now, then stop. You are not ready for the kind and detail of accounting that will be required to get away with deducting part of your credit card’s interest costs.
Because to do that, you’ll need to know when the business charged something, and when the business paid reasonable payments from its attributed cash to that credit card. Then you can compute balance day by day, and accrue interest day by day, and arrive at the interest actually attributable to the business.
Note that the business needs to post credit card payments, and the payments need to be reasonable. It’s allowed for the business to go deeper and deeper into debt “on paper” as long as it’s making reasonable payments like a person might.
And of course the business must show a profit in some years, or else like Amazon have a business model that shows they will make money eventually. Otherwise the IRS will disallow it as a business, and treat it as a hobby, at which point you can only deduct cost of goods sold.