Are Bank Fees Tax Deductible? Business vs. Personal

Bank fees are charges imposed by financial institutions for various services, from account maintenance to transaction processing. A common question for individuals and business owners is whether these fees can be deducted for tax purposes. The answer depends on the fee’s nature and purpose. Understanding the distinctions between business, investment, and personal banking activities is essential for proper tax treatment.

Deductible Business Bank Fees

Bank fees incurred in a trade or business are generally tax-deductible. To qualify, these expenses must be “ordinary and necessary,” meaning they are common and helpful for the business. This includes charges for maintaining and transacting through business bank accounts.

Deductible business bank fees include monthly service charges for business checking or savings accounts. Fees for business credit cards, such as annual or transaction fees, are also deductible, though interest on these cards is handled separately. Wire transfer fees, ACH fees, and point-of-sale (POS) terminal fees directly related to business operations also qualify. Loan origination fees for business loans may be deductible, often amortized over the life of the loan.

Deductible Investment Bank Fees

For individuals, the deductibility of investment-related bank fees has changed due to recent tax law. Before the Tax Cuts and Jobs Act (TCJA) of 2017, certain investment expenses, including some bank fees, were deductible as miscellaneous itemized deductions. These were subject to a 2% adjusted gross income (AGI) floor, meaning only the amount exceeding 2% of AGI could be deducted.

However, for tax years 2018 through 2025, the TCJA suspended most miscellaneous itemized deductions subject to the 2% AGI limit for individuals. This means individuals generally cannot deduct investment-related bank fees during this period.

Non-Deductible Personal Bank Fees

Bank fees associated with personal accounts are generally not tax-deductible. These charges are considered personal expenses, regardless of whether a personal account is occasionally used for business transactions. Maintaining a clear separation between personal and business finances is important to avoid confusion regarding deductibility.

Non-deductible personal bank fees include monthly maintenance fees for personal checking or savings accounts. Overdraft fees incurred on personal accounts, ATM fees for personal cash withdrawals, and late payment fees on personal credit cards are also not deductible. Fees for personal wire transfers or money orders also fall into this category, as they do not relate to income-producing business activities.

Reporting Deductible Bank Fees

Accurate record-keeping is important for substantiating tax deductions, including bank fees. Businesses should retain bank statements, invoices, and other documentation that clearly show the nature and purpose of each fee. This helps validate deductions in case of an IRS inquiry.

Sole proprietors and single-member LLCs report deductible business bank fees on Schedule C (Form 1040). Partnerships and multi-member LLCs report these expenses on Form 1065, while corporations use Form 1120 or Form 1120-S. If bank fees relate to rental property activities, they are reported on Schedule E (Form 1040).