Interest on underpaid federal income tax is not a deductible business expense.
Why it is not deductible
Interest charged on underpaid individual income tax is personal interest, even when every dollar of the income came from the business. The underlying liability is your own income tax rather than a business obligation, so there is no Schedule C deduction and nothing goes on line 16b. Penalties for late filing or late payment are not deductible either.
Log it once, with the line already on it. Type an expense in plain words in ClaryBook and it is filed with a date, vendor, amount and what it was for, so the number your preparer needs for interest on underpaid federal income tax is already written down.
Start for freeWhat interest on underpaid federal income tax is confused with
- Line 16b, interest, other
- Line 16b takes interest on debt incurred in the business; interest on your own income tax bill is not business debt, whatever the income that created it.
- Line 23, taxes and licenses
- Line 23 covers business taxes and licenses such as payroll taxes and state business licenses, never federal income tax or the interest on it.
Examples people try to deduct here
- $212 of interest on a $4,000 balance paid four months after the April deadline
- Interest on an underpayment of estimated tax for the prior year
- Interest running on an installment agreement for personal income tax
- Interest charged on a balance created by a notice adjusting your Schedule C income
What does not belong here
- Any line 16b deduction
- The late filing or late payment penalty
- The federal income tax itself, which is never a Schedule C expense
- Interest on a state income tax balance, which is also personal
What to keep
Keep the notices, which show interest separately from penalty and tax. Interest the business is charged on its own payroll tax account is a different matter, so keep those notices apart from these.
Other things that are not deductible
| Expense | Line |
|---|---|
| a business suit | Not deductible |
| a government fine or penalty | Not deductible |
| a parking ticket | Not deductible |
| a personal expense on the business card | Not deductible |
| a spouse's airfare on your business trip | Not deductible |
| a traffic ticket | Not deductible |
| an unpaid invoice | Not deductible |
| commuting mileage | Not deductible |
| country club dues | Not deductible |
| estimated tax payments | Not deductible |
| federal income tax | Not deductible |
| groceries for your home | Not deductible |
Related lookups
Sources
This page explains how Schedule C lines work. It is general information, not tax advice for your situation. If an expense is large or the answer turns on a fact about your business, confirm it with your tax preparer.
Looking for a different expense? The full Schedule C line lookup has every line from 8 to 27 with the expenses that belong on each, and Schedule C expense categories walks the whole form in order.
Log it once, with the line already on it. Type an expense in plain words in ClaryBook and it is filed with a date, vendor, amount and what it was for, so the number your preparer needs for interest on underpaid federal income tax is already written down.
Start for free