Business checking account fees are deductible as ordinary business expenses on your federal tax return

If you pay a monthly maintenance fee, per-check fee, overdraft fee, or wire transfer fee on a business checking account, you can deduct that cost. The IRS treats bank fees as ordinary and necessary business expenses under Section 162 of the tax code. You do not need the fee to be large or unusual — any amount counts, as long as the account itself is used for business.

The catch is that the account must be genuinely for business use. A personal checking account does not may have access to, even if you occasionally deposit a business check into it. A business account — whether you are a sole proprietor, partnership, LLC, S-corp, or C-corp — qualifies in full.

You deduct these fees on your business tax return, not on your personal return. The location on the form depends on your business structure and how you file.

Key Takeaways

  • Monthly maintenance fees, per-check charges, overdraft fees, and wire transfer fees on a business checking account are all deductible as ordinary business expenses.
  • The account must be used for business purposes; personal checking account fees do not may have access to, even if you use the account partly for business.
  • You deduct the fees on your business tax return (Schedule C for sole proprietors, Form 1120 for corporations, or the appropriate form for your entity type), not on your personal return.
  • Keep your bank statements or monthly statements as proof of the fees; the IRS may ask to see them if you are audited.
  • State and local taxes may also allow the deduction, but rules vary by state and by tax type.

Where to report the deduction on your federal return

If you are a sole proprietor, you report business checking fees on Schedule C (Form 1040), which is where you list all business income and expenses. The fees go in the "Other Expenses" section at the bottom of the form. You can list them as a single line item or group them with other bank fees if you have multiple accounts.

If you operate as an LLC taxed as a sole proprietor, you also use Schedule C. If your LLC is taxed as an S-corp or C-corp, the fees go on Form 1120-S or Form 1120 respectively, in the deductions section.

If you are a partnership, the fees are deducted on Form 1065 (U.S. Return of Partnership Income) in the deductions section. Each partner's share of the deduction then flows to their personal return.

Keep your bank statements for at least three years. The IRS does not require you to attach them to your return, but you need them if the agency audits you and asks to verify the expense.

What counts as a deductible bank fee

Monthly maintenance or service fees are the most common deductible charge. These are flat fees that banks charge simply to keep the account open, regardless of how much money you have in it or how many transactions you make.

Per-check fees, per-deposit fees, and transaction fees also may have access to. Some banks charge a small amount each time you write a check or make a deposit; these are deductible. Wire transfer fees, ACH transfer fees, and fees for stopping payment on a check are deductible as well.

Overdraft fees and insufficient-funds fees count too. If the bank charges you because you overdrew the account or a check bounced, that fee is a business expense and can be deducted.

Interest charges on a business line of credit or business loan are not bank fees — they are interest expense, which is deductible but reported separately. Fees for credit card processing, merchant services, or payment processing are also separate from checking account fees and have their own deduction rules.

State and local tax treatment

Most states that have a business income tax allow the same deduction for bank fees that the federal government does. The fee is treated as an ordinary business expense under state law as well.

Some states have different rules or thresholds, so check your state's business tax guidance if you file a state return. A few states do not allow certain deductions that the federal government does, but bank fees are rarely among them.

If you are subject to a local business tax or gross receipts tax, the rules may differ. Some local taxes do not allow deductions at all; others allow them but calculate them differently. Contact your city or county tax office if you file locally.

How to track and organize bank fees for tax time

The simplest method is to download your bank statements each month and highlight or note the fees. Most online banking platforms let you export statements as a PDF or CSV file. Save these files in a folder labeled by year and month.

If you have multiple business accounts, create a spreadsheet with columns for the date, account name, fee type, and amount. Add a row for each fee as it appears on your statement. At the end of the year, sum the column to get your total deductible bank fees.

Alternatively, many accounting software packages (QuickBooks, FreshBooks, Wave) can import your bank transactions directly and flag fees automatically. If you use one of these tools, the fees are often categorized for you, and you can run a report at tax time showing the total.

Do not rely on memory or your checkbook register alone. Bank statements are the official record, and they are what the IRS will ask to see if there is a question.

When bank fees might not be deductible

If the checking account is personal, not business, the fees are not deductible — even if you deposit business income into it sometimes. The IRS requires that the account be set up and maintained for business purposes.

If you are a business owner but the account is in your personal name and you use it for both personal and business transactions, the fees still do not may have access to. The solution is to open a separate business checking account. Once you do, all fees on that account are deductible going forward.

If you have not yet formed a business entity and are operating as a hobby or side income source, the IRS may not treat the account as a business account. The agency looks at whether you have a genuine profit motive and are operating in a businesslike manner. If you cannot show that, the fees may be disallowed.

Frequently Asked Questions

Can I deduct fees from a business savings account or money market account?

Yes, if the account is used for business. Maintenance fees, transfer fees, and early withdrawal penalties on a business savings or money market account are deductible the same way checking account fees are. Keep your statements to prove the account was used for business purposes.

What if my bank charges me a fee for not keeping a minimum balance?

That fee is deductible. Any charge the bank assesses on a business account — whether it is for low balance, inactivity, or any other reason — counts as an ordinary business expense.

Do I need to itemize deductions to claim bank fees?

No. Bank fees are a business expense, not a personal deduction. You report them on your business tax return (Schedule C, Form 1120, or Form 1065) regardless of whether you itemize personal deductions. They reduce your business income before you calculate self-employment tax or corporate tax.

Can I deduct fees if I use the account partly for personal and partly for business?

The IRS wants to see a dedicated business account. If you use one account for both personal and business, the agency may disallow the entire fee or ask you to split it. The safest approach is to open a separate business checking account so all fees on it are clearly business-related.

What if I closed the business account mid-year — can I still deduct the fees?

Yes. Deduct all fees charged while the account was open and used for business, even if you closed it before year-end. The deduction is based on when the fee was charged, not when the account closed.