Bank charges are tax deductible only if the account is used for business or investment purposes
Personal bank fees — overdraft charges, monthly maintenance fees, ATM fees from using another bank's machine — are not deductible on your tax return. The IRS treats these as personal expenses, the same way it treats groceries or gas for commuting.
If you have a business bank account or an investment account, the fees you pay to maintain that account may be deductible as a business expense or investment expense. The key is that the account itself must be used to generate income or manage business operations, not just to hold money you earn from a job.
The line between deductible and non-deductible is the account's purpose, not the type of fee. A $35 overdraft fee on a personal checking account stays non-deductible even if it stings. A $15 monthly fee on a business account is deductible because the account exists to run your business.
Key Takeaways
- Personal bank account fees are never deductible, even if you pay them regularly or they are high.
- Business bank account fees are deductible as a business expense on Schedule C (if you are self-employed) or on your business tax return.
- Investment account fees — such as fees charged by a brokerage to hold stocks or bonds — may be deductible as miscellaneous investment expenses, though rules have tightened in recent years.
- You must keep bank statements or receipts showing the fee and the date paid to support any deduction you claim.
Business bank account fees you can deduct
If you are self-employed or own a business, monthly maintenance fees, per-transaction fees, wire transfer fees, and check-printing fees on your business account are all deductible. These are ordinary costs of running the business and belong on Schedule C (Form 1040) under "Office Expense" or "Bank Fees," depending on how your tax software or accountant organizes it.
The account must be genuinely separate from your personal finances and used for business transactions. If you use one account for both personal and business money, you can still deduct the portion of fees that relate to business use, but you need to track which transactions are business and which are personal. Many accountants recommend keeping them completely separate to avoid questions during an audit.
If you operate as an LLC, S-corp, or C-corp, bank fees are deductible on the business tax return itself, not on your personal return. Your accountant will handle this as part of preparing the business return.
Investment account fees and the limits on deducting them
Fees charged by a brokerage or investment firm to hold, trade, or manage stocks, bonds, mutual funds, or other securities used to be deductible as miscellaneous itemized deductions. However, the Tax Cuts and Jobs Act of 2017 suspended this deduction for tax years 2018 through 2025. Unless Congress extends the old rule or changes it, you cannot deduct investment fees during this period.
This applies to advisory fees, account maintenance fees, and trading commissions paid to a brokerage. If you pay a financial advisor a flat fee to manage your portfolio, that fee is also not deductible under current law.
After 2025, the deduction may return, but you should not assume it will. Check the current tax year rules or ask your accountant before claiming any investment-related fees.
Fees that blur the line: rental property and passive income
If you own rental property or have other passive income sources, bank fees tied to managing that income may be deductible. A fee on an account used to collect rent payments or hold security deposits could may have access to as a rental expense. Similarly, fees on an account used to manage dividend income or interest from bonds might be deductible.
The rule is the same: the account must be used for the income-producing activity. If you use a personal account and occasionally deposit rental income into it, the fees on that account are still personal and not deductible. If you maintain a separate account for rental income and expenses, fees on that account are deductible as part of your rental expense deductions.
Keep clear records of which account is used for which purpose. If you are audited, the IRS will want to see that the account was genuinely dedicated to the rental or passive income activity, not just used for it sometimes.
What counts as a bank charge for tax purposes
Bank charges include monthly maintenance or service fees, per-check fees, overdraft fees, NSF (non-sufficient funds) fees, wire transfer fees, international transaction fees, and fees for stopping payment on a check. Fees charged by your bank for services you use count as charges.
Interest you pay on a loan or credit card is not a bank charge and follows different deduction rules. Penalties for early withdrawal from a savings account or CD are also treated separately — they are deductible only in limited circumstances (usually if you are over 59½ and the bank imposed the penalty anyway).
ATM fees, whether charged by your own bank or another bank's ATM, are personal expenses and never deductible. Fees for expedited delivery of checks or statements are also personal.
How to document bank charges for your tax return
Keep your bank statements for the entire tax year. The statement shows the date, amount, and description of each fee. If you claim business bank fees as a deduction, you need to be able to show the IRS that the account was used for business and that the fees were actually charged.
If your tax software or accountant asks you to list bank fees, provide the total for the year and keep the statements in a folder. You do not send statements with your return, but you must have them if the IRS asks for proof.
If you use accounting software like QuickBooks or Wave, you can categorize fees as they post to your account, which makes it easier to track them by type and by account. This is especially useful if you have multiple business accounts or a mix of business and personal accounts.
Frequently Asked Questions
Can I deduct overdraft fees on my personal checking account?
No. Overdraft fees are personal expenses and are never deductible, regardless of how often they occur or how much they cost. They are treated the same way as any other personal banking cost.
What if I use my personal account for occasional business transactions?
The fees on that account are still not deductible because the account is personal. To deduct bank fees, you need a separate business account used primarily for business. Mixing personal and business money in one account makes the fees non-deductible.
Are credit card annual fees deductible?
No. Credit card fees, including annual fees, are personal expenses. However, if you use a business credit card for business expenses, the annual fee may be deductible as a business expense — check with your accountant, as the rules vary by how the card is structured.
Can I deduct fees my bank charged for a mistake they made?
If the fee is on a personal account, no. If it is on a business account and you can show the fee was a legitimate business banking cost (even if caused by an error), you may be able to deduct it. Keep documentation of what the fee was for.
Do I need to itemize deductions to claim business bank fees?
No. Business bank fees are deducted on your business tax return or Schedule C, not as itemized deductions on your personal return. They reduce your business income directly, which is more valuable than itemizing.