Yes, most business bank fees are deductible, but only if your account is genuinely for business

Business bank account fees are ordinary and necessary expenses under IRS rules, which means you can deduct them on your tax return. This includes monthly maintenance fees, per-transaction fees, overdraft fees, wire transfer charges, and fees for checks or deposit slips. The catch is straightforward: the account must be used for business purposes, not personal ones.

If you mix personal and business money in the same account, you can only deduct the portion of fees that relates to business activity. The IRS expects you to track this, though in practice they focus more on whether the account itself serves a business function than on splitting fees down to the dollar.

You deduct these fees on Schedule C (if you're a sole proprietor or single-member LLC) or on your business tax return (if you're a corporation or partnership). The line item is usually called "Bank Fees" or "Office Expenses," depending on your tax software.

Key Takeaways

  • Business bank fees are deductible as ordinary and necessary business expenses on your tax return.
  • The account must be used for business purposes; personal accounts and their fees are not deductible.
  • You report these fees on Schedule C (for sole proprietors and single-member LLCs) or your business return.
  • If an account is mixed-use, you can deduct only the portion of fees tied to business activity, though the IRS rarely audits this level of detail.
  • Overdraft fees and NSF (non-sufficient funds) fees are deductible if they occur on a business account.

What counts as a deductible business bank fee

The IRS does not publish a list of approved fees. Instead, it applies a two-part test: Is the fee ordinary in your industry, and is it necessary to run your business? Most common fees pass both tests.

Fees that are clearly deductible: monthly account maintenance, per-check fees, per-deposit fees, wire transfer charges, ACH transfer fees, stop-payment fees, account research fees, and fees for printed checks or deposit slips. If your bank charges you to use their mobile app or online banking, that fee is deductible too.

Fees in a gray area: overdraft fees and NSF (non-sufficient funds) fees are deductible if they occur on a business account, because they are costs of operating the business. However, some accountants argue they should be treated as a loss rather than an expense. For tax purposes, the difference is small, but it matters for how you report them. Ask your accountant or tax preparer which approach they use.

Fees that are not deductible: penalties for late payment of taxes, penalties for breaking a contract with the bank, or fines imposed by regulators. These are penalties, not business expenses, and the tax code treats them differently.

How to track and report business bank fees

Your bank statement shows every fee charged to the account. At the end of the year, add them up and enter the total on your tax return. You do not need to list each fee separately; one line item for the year is standard.

If you use accounting software like QuickBooks, FreshBooks, or Wave, you can categorize each fee as it posts to the account, and the software will sum them automatically. If you file taxes yourself using software like TurboTax or TaxAct, you will enter the total on the appropriate line when you reach the business expenses section.

Keep your bank statements for at least three years. The IRS can audit your return up to three years after you file, and statements are the only proof that the fees were real and that the account was used for business.

Mixed-use accounts and how to handle them

If you deposit both personal and business income into the same account and pay business and personal expenses from it, you have a mixed-use account. The IRS allows you to deduct fees, but only the portion that relates to business activity.

In theory, you should calculate the percentage of the account used for business and deduct that percentage of the fees. For example, if 80 percent of your deposits and withdrawals are business-related, you deduct 80 percent of the annual fees. In practice, most small business owners either deduct all the fees (if the account is mostly business) or none (if it is mostly personal), and the IRS rarely challenges this unless the account is obviously personal.

The better approach is to open a separate business account and use it only for business. This eliminates the guesswork, makes your records cleaner, and gives you a stronger position if you are ever audited. Many banks offer business checking accounts with low or no monthly fees, so the cost of separating is often zero.

Sole proprietors, LLCs, and corporations: where to report the fees

Sole proprietors and single-member LLCs: Report bank fees on Schedule C, Part II, under "Office Expense" or "Bank Fees." The total goes on line 27a (Office Expense) or line 27b (Other Expenses), depending on your version of the form.

Multi-member LLCs and partnerships: Report on Form 1065, Schedule C, line 18 (Office Expense).

S-Corporations and C-Corporations: Report on Form 1120-S or Form 1120, line 25 (Office Expense).

If you use a tax preparer or accountant, they will place the fees in the correct location. If you file yourself, your tax software will guide you to the right line based on your business structure.

What happens if you deduct fees from a personal account

If the IRS audits your return and finds that you deducted fees from a personal checking account, they will disallow the deduction. You will owe back taxes on that amount plus interest. Penalties explore if the IRS determines the error was intentional rather than a mistake.

The risk is low if the account is genuinely used for business, even if it also handles some personal transactions. The risk is higher if the account is clearly personal—for example, if it is in your name alone, has no business income deposited to it, and is used only to pay personal bills. In that case, deducting the fees looks like tax evasion, not a gray area.

To stay safe: use a business account for business, keep statements, and report what you actually deduct. If you are unsure whether a fee qualifies, ask a tax preparer rather than guessing.

Frequently Asked Questions

Can I deduct fees from a business savings account?

Yes. Savings accounts used for business purposes have deductible fees just like checking accounts. Monthly maintenance fees, early withdrawal penalties, and fees for transfers are all deductible if the account holds business funds.

What if my bank charged me a fee by mistake and refunded it later?

Do not deduct it. You only deduct fees that you actually paid. If the bank refunded the fee, your net cost was zero, so there is nothing to deduct. Your bank statement will show the refund, so your records will be clear.

Are credit card processing fees deductible?

Yes, but they are not bank fees. Credit card processing fees (the percentage your bank takes when customers pay by card) are deductible as a business expense, usually under "Merchant Fees" or "Credit Card Processing." They are reported the same way as bank fees but are a separate line item.

Do I need receipts for bank fees, or is my statement enough?

Your bank statement is your receipt. You do not need a separate document. Keep statements for at least three years in case of an audit.

If I close a business account and open a new one, can I deduct fees from both in the same year?

Yes. Add up all fees from all business accounts you used during the year and deduct the total. Your bank statements will show which account each fee came from.