If you run a business, side hustle, or freelance operation, you’re probably paying bank fees and credit card processing fees every single month, and most people don’t realize those costs are fully deductible business expenses.

The good news? It’s simple, legal, and easy to fix once you know what to look for.

Let’s break it down.

Yes — Bank Fees and Processing Fees Are Tax-Deductible

If a fee is ordinary and necessary to run your business, the IRS generally allows you to deduct it. That includes fees you pay just to move, receive, or process money.

Common deductible bank fees include:

• Monthly business account maintenance fees
• Wire transfer fees
• ACH transfer fees
• Overdraft fees (business accounts only)
• Merchant account fees
• Payment gateway fees

Common deductible credit card & payment processing fees:

• Stripe processing fees
• PayPal transaction fees
• Square fees
• Shopify Payments fees
• Credit card merchant fees
• Online payment platform service charges

If you’re accepting payments, you’re paying fees – and if you’re paying fees, you should be deducting them.

Who Can Deduct These Fees?

You can deduct bank and processing fees if you’re:

• A freelancer or contractor (1099 worker)
• A sole proprietor
• An LLC or S-Corp owner
• A creator, coach, consultant, or online seller
• Running a side hustle (yes, even part-time)

If the account or processor is used for business income, the fees are deductible.

What You Can’t Deduct

Not every fee qualifies — here’s where people trip up.

You cannot deduct:

• Personal checking or credit card fees
• Fees tied to personal expenses
• Late fees on personal credit cards
• Personal overdraft fees

This is why separating business and personal finances matters.

Where Do These Deductions Go on Your Taxes?

For most small businesses and freelancers, bank and processing fees are deducted as:

“Bank Fees” or “Other Business Expenses” (on Schedule C or business return)

The IRS doesn’t require a special category, but proper tracking and documentation is key.

Why This Deduction Is Bigger Than You Think

Processing fees are usually 1.5%–3.5% of every transaction.

That adds up fast.

If your business processes:

• $50,000 per year → $1,500–$2,000 in fees
• $100,000 per year → $3,000–$4,000 in fees
• $250,000 per year → $7,500+ in fees

That’s real money coming off your taxable income.

Miss this deduction, and you’re voluntarily paying more tax than required.

The #1 Reason People Miss This Deduction

Most people don’t see the fees.

Platforms often deposit net income, already subtracting fees, so the cost disappears unless you’re tracking it intentionally.

If you’re only recording deposits and not gross sales + fees, you’re under-deducting.

How to Track Bank and Processing Fees Correctly

To safely claim this deduction, you should:

• Track gross income (before fees)
• Track fees separately as expenses
• Keep monthly statements or platform reports
• Match deposits to processor summaries
  

This is where automation matters , spreadsheets miss this all the time.

How TaxHakr Helps You Capture These Deductions Automatically

TaxHakr doesn’t just track expenses, it identifies deductions you didn’t even realize you had.

With TaxHakr, you can:

• Automatically track bank and processor fees
• Separate gross income from net deposits
• Flag deductible expenses in real time
• Avoid missed write-offs at tax time
• Build a defensible paper trail for the IRS

No guessing. No scrambling. No overpaying.

Bottom Line

If you’re paying:

• Bank fees
• Payment processing fees
• Merchant service fees

…and you’re not deducting them – you’re leaving money on the table.

These deductions are legal, common, and expected. The only mistake is missing them.

Disclaimer

This content is for educational purposes only and does not constitute legal or tax advice. Always consult a qualified tax professional regarding your specific situation.