Most bank account fees are not tax deductible for personal accounts

If you pay a monthly maintenance fee, overdraft fee, or ATM fee on a personal checking or savings account, you cannot deduct those costs on your tax return. The IRS treats personal banking fees as personal expenses, the same way it treats groceries or gas. The rule changed in 2017 when the Tax Cuts and Jobs Act eliminated deductions for miscellaneous personal expenses, and those rules remain in place.

The one exception is if you have a business bank account and the fees are directly tied to running that business. A sole proprietor, partnership, or S-corporation can deduct business banking fees as ordinary business expenses. But the account itself has to be set up for business purposes, not personal use, and you need to track which fees belong to the business.

If you are self-employed or run a small business, the distinction matters. A business checking account fee is deductible. A personal account fee is not, even if you sometimes use the account for business deposits.

Key Takeaways

  • Personal bank account fees—maintenance fees, overdraft charges, ATM fees—cannot be deducted on your individual tax return under current IRS rules.
  • Business bank account fees are deductible if the account is used for business purposes and you can document the business connection.
  • The distinction between personal and business accounts matters; using a personal account for some business activity does not make the fees deductible.
  • If you are self-employed, opening a separate business checking account makes fee deductions straightforward and keeps your records clearer for the IRS.
  • Interest paid on a business line of credit or business loan is deductible, but that is different from account fees.

How the IRS treats business versus personal banking fees

The IRS allows businesses to deduct ordinary and necessary expenses. For a business, a checking account fee is ordinary—most businesses have one—and necessary to operate. You report these on Schedule C (for sole proprietors), Schedule E (for rental properties), or the appropriate business tax form for your entity type.

The fee itself goes on the line for "office expenses" or "bank fees" depending on your tax software or accountant's preference. What matters is that the account is genuinely used for business, not that you occasionally deposit a business check into a personal account.

If you are a sole proprietor and you comingle personal and business money in one account, the IRS will not disallow the fee outright, but you need to be able to show what portion of the fee relates to business use. This is why accountants recommend a separate business account: it makes the deduction defensible and your bookkeeping simpler.

When you might see banking fees on a business tax return

Common business banking fees that show up as deductible expenses include monthly account maintenance, per-check fees, wire transfer charges, and merchant processing fees if you accept credit cards. These are all ordinary costs of running a business and belong on your return.

Overdraft fees on a business account are also deductible, though they signal a cash flow problem worth addressing. Returned check fees, stop-payment fees, and account research fees all count the same way.

What does not count: fees you pay to your accountant or bookkeeper to help you manage the account, or fees charged by a payroll processor. Those are separate line items (accounting fees, payroll services) and belong in different categories.

The difference between account fees and interest on business debt

Do not confuse bank account fees with interest on a business loan or line of credit. Interest on money you borrowed for business purposes is deductible—and often a much larger deduction than fees. Interest goes on a different line of your tax return (usually "interest" under business expenses) and has different rules.

If you carry a balance on a business credit card, the interest is deductible. The annual fee on that card is also deductible. But if you use the same card for personal expenses, you can only deduct the portion that relates to business use, and you need documentation to support that split.

What to do if you have mixed personal and business banking

If you run a business but have not yet opened a separate business account, you have two options: open one now, or document the business portion of your current account's fees.

Opening a separate account is simpler. Most banks offer business checking accounts with fees ranging from $10 to $30 per month, and some waive fees if you maintain a minimum balance or set up direct deposit. The fee itself becomes deductible, and your personal and business finances stay separate—which also protects you in case of a liability claim.

If you want to keep using a personal account, you need to track what portion of the fee relates to business use. If the account is 60% business and 40% personal, you can deduct 60% of the fee. But this requires documentation: a log of deposits, a record of which checks were business-related, or a written explanation of how you use the account. The IRS is unlikely to audit a small fee deduction, but if they do, you need to be able to show your math.

How to report business banking fees on your tax return

For a sole proprietor, business banking fees go on Schedule C, Part II, under "Office expense" or "Bank fees." The total for the year goes in the box; you do not itemize each monthly fee.

For an LLC taxed as a corporation, fees go on Form 1120 under "Office expenses" or "Utilities." For an S-corporation, they go on Form 1120-S in the same place. If you use tax software, it will guide you to the right line.

Keep your bank statements and any fee documentation for at least three years. The IRS can request them if they audit your return, and having them ready protects you. If you use accounting software like QuickBooks or FreshBooks, categorize the fee as "Bank Fees" or "Office Expense" when you record it, and the software will carry it to the right place on your return.

Frequently Asked Questions

Can I deduct ATM fees if I use them for business withdrawals?

Only if the ATM is part of a business account. If you withdraw cash from a personal account—even if you use that cash for business—the ATM fee is not deductible. The account type determines deductibility, not how you spend the money afterward.

What if my bank charged me an overdraft fee on a business account?

Yes, overdraft fees on a business account are deductible. Report them the same way you would a monthly maintenance fee, on the "Bank fees" or "Office expense" line of your business tax form.

Is the annual fee on a business credit card deductible?

Yes, if the card is used for business. The annual fee is deductible as a business expense. Interest on the card balance is also deductible. If you use the card for both business and personal expenses, you can only deduct the business portion.

Do I need receipts for bank fees to deduct them?

You need your bank statements, which show the fees charged each month. You do not need a separate receipt. Keep statements for three years in case the IRS asks for documentation.

Can I deduct fees from a savings account I use for business reserves?

Only if the account is designated as a business account. A personal savings account is personal, even if you keep business money in it. Open a business savings account if you want the fees to be deductible.