Bank fees are deductible only if the account is used for business, and only on your business tax return—not your personal return
If you have a personal checking account, savings account, or money market account, the fees you pay are not deductible. The IRS treats personal banking fees as a personal expense, the same way it treats groceries or gas. You pay them with after-tax dollars and cannot write them off.
If you have a business bank account—whether you are a sole proprietor, partnership, S-corp, or LLC—fees charged by the bank are deductible as a business expense. This includes monthly maintenance fees, per-check fees, overdraft fees, wire transfer fees, and fees for business checks or deposit slips. You deduct them on Schedule C (for sole proprietors and single-member LLCs), Schedule E (for rental property), or the appropriate business tax form for your entity type.
The key distinction is the account's purpose. A business account exists to handle money related to your trade or business. A personal account exists to handle your living expenses. If you use a personal account for business transactions, the fees on that account still are not deductible—the IRS looks at the account type, not how you happen to use it.
Key Takeaways
- Personal bank fees—including overdraft, maintenance, and transfer fees—cannot be deducted on any tax return.
- Business bank fees are deductible as a business expense if the account is designated for business use and you report business income.
- The type of account matters more than how you use it; a personal account used for some business transactions still does not may have access to.
- You deduct business bank fees on your business tax form (Schedule C, Schedule E, or your entity's return), not on your personal return.
- Investment account fees and fees charged by investment advisors have different rules and may be deductible under different circumstances.
How the IRS categorizes bank fees
The IRS divides expenses into two categories: personal and business. Personal expenses come out of your pocket after taxes and are never deductible. Business expenses reduce your taxable income before you calculate what you owe.
A bank fee is personal if the account is in your name and used for your household, living, or personal financial needs. A bank fee is business if the account is held in your business name or is clearly designated for business use, and you use it to deposit business income or pay business expenses.
Some people blur this line by using a personal account for both personal and business transactions. The IRS still does not allow a deduction. You cannot split the fee or claim a portion of it. If the account is personal, the fees stay personal.
What counts as a deductible business bank fee
If you have a legitimate business account, nearly every fee the bank charges qualifies as a business expense. Monthly maintenance or service fees are deductible. Per-check fees, per-deposit fees, and fees for wire transfers or ACH transfers are deductible. Overdraft fees, returned-check fees, and fees for stop-payment orders are deductible. Fees for business checks, deposit slips, or account statements are deductible.
The fee must be charged by the bank itself, not by a third party. If you pay a fee to a payment processor, accountant, or bookkeeper, that is a separate business expense but follows different rules. Bank fees are specifically the charges your bank imposes for maintaining or using the account.
Interest you pay on a business loan or line of credit is also deductible, but it is not a "fee"—it is interest expense and goes on a different line of your tax form. The same applies to credit card interest on a business card; it is deductible, but it is interest, not a fee.
How to report business bank fees on your tax return
The location where you report the fee depends on your business structure. If you are a sole proprietor or own a single-member LLC taxed as a sole proprietorship, you report business bank fees on Schedule C (Form 1040), under the line for "Office expense" or "Other expenses." You add up all your office and miscellaneous expenses and enter the total.
If you own rental property and the fee is from an account used to collect rent or pay property expenses, you report it on Schedule E under "Other expenses." If you are a partnership, S-corp, or multi-member LLC, the business itself files a return (Form 1065, Form 1120-S, or Form 1120), and bank fees go on that return as an ordinary business expense.
Keep the bank statement or fee notice as proof. The IRS does not require you to attach receipts to your return, but you must keep them for at least three years in case of an audit. A bank statement showing the fee and the date is sufficient documentation.
Investment and brokerage account fees
Fees charged by investment accounts, brokerage firms, and financial advisors follow different rules. If you pay a fee to a financial advisor or investment manager, it may be deductible as a miscellaneous itemized deduction, but only if you itemize deductions on Schedule A and only if your total miscellaneous deductions exceed 2% of your adjusted gross income. This rule has made investment advisory fees largely non-deductible for most taxpayers in recent years.
Fees charged directly by a brokerage for trading, account maintenance, or advisory services are also subject to the 2% threshold if you itemize. However, if the brokerage fee is charged against your investment account (reducing your account balance), it may reduce your cost basis in the investment, which affects your capital gains calculation instead.
If you are a professional trader or investment advisor and the account is used for your business, the fees may be fully deductible as a business expense. The distinction depends on whether you are investing for personal wealth-building or operating a business. Consult a tax professional if you are unsure.
When you cannot deduct bank fees
You cannot deduct bank fees on a personal account, even if you occasionally use it for business. You cannot deduct fees on a joint account if it is primarily personal. You cannot deduct fees on a savings account used for emergency funds or personal savings, even if some of the money came from a side business.
You also cannot deduct fees if you do not report the income from the account. If you have a business but do not file a business tax return or report the income, the IRS will not allow a deduction for the related expenses. The account and the income must both be reported on your tax return for the fees to may have access to.
Fees charged by third parties—such as payment processors, accounting software, or bookkeeping services—are separate business expenses and have their own deduction rules. They are not bank fees, even if they appear on your bank statement.
Frequently Asked Questions
Can I deduct overdraft fees on my personal checking account?
No. Overdraft fees on a personal account are not deductible under any circumstance. They are treated as a personal expense. If the account is used for business, you would need to open a separate business account to deduct the fees.
What if I use my personal account for my side business?
The fees on that personal account are still not deductible. The IRS looks at the account type, not how you use it. To deduct bank fees, you need a separate account designated for business use, ideally in your business name.
Are credit card fees deductible?
Credit card annual fees and processing fees on a business credit card are deductible as business expenses. Interest charges on a business credit card are also deductible, but they are reported as interest expense, not a fee. Personal credit card fees and interest are never deductible.
Do I need to itemize deductions to deduct business bank fees?
No. Business bank fees are deducted as part of your business income calculation, not as itemized deductions. They reduce your taxable business income regardless of whether you itemize or take the standard deduction on your personal return.
What documentation do I need to keep for bank fees?
Keep your bank statements showing the fees charged. The statement should show the date, the amount, and the reason for the fee. You do not need to attach these to your tax return, but keep them for at least three years in case the IRS asks for proof.