A merchant cash advance finance charge belongs on Line 16b, interest, other.
Why line 16b
The cost of a merchant cash advance is a financing cost of the business, deducted as other business interest on line 16b where the arrangement is in substance a loan you repay. Only the charge is deductible, never the repayment of the advanced amount itself. Where the paperwork is genuinely a sale of future receivables rather than a loan, the discount is still a business cost but is reported in other expenses, so read the agreement before picking the line.
Stop looking up lines one at a time. ClaryBook totals your year into an IRS Schedule C worksheet in form order, Part I and Part II line by line, so a merchant cash advance finance charge lands on Line 16b without you sorting it.
Start for freeWhat a merchant cash advance finance charge is confused with
- Line 27a, other expenses
- If the agreement is a true sale of future receivables rather than a loan, the discount is a financing cost in other expenses on line 27a rather than interest on 16b.
- not deductible, not deductible
- The principal you repay out of daily card settlements is not an expense at all; only the charge on top of it is.
Examples that belong on line 16b
- A $6,000 total charge on a $30,000 advance repaid from daily card settlements
- The factor rate cost on a $15,000 advance taken to cover a seasonal gap
- A $450 origination charge withheld from the advance before it reached the account
- The monthly financing cost on invoice factoring with recourse
What does not belong here
- The repayment of the advanced amount
- The full remittance taken from each day's card sales
- Charges accrued but not yet paid, if you file on the cash method
What to keep
Keep the advance agreement, the remittance history, and the provider's year-end statement of charges. The agreement is what decides whether this is interest at all.
Other expenses on line 16b
| Expense | Line |
|---|---|
| business credit card interest | Schedule C, Line 16b |
| business loan interest | Schedule C, Line 16b |
| car loan interest | Schedule C, Line 16b |
| interest on a personal loan used in the business | Schedule C, Line 16b |
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.
Stop looking up lines one at a time. ClaryBook totals your year into an IRS Schedule C worksheet in form order, Part I and Part II line by line, so a merchant cash advance finance charge lands on Line 16b without you sorting it.
Start for free