Are Bank Fees Tax Deductible?

For the individual consumer, the tax law provides scant comfort for service, overdraft or check-printing fees, as they are not tax deductible. For businesses, however, the situation is entirely different, and every penny of every charge can be deducted as a legitimate expense. Even small service fees, such as $5 for requesting a duplicate statement, should be tracked and claimed, as they can add up significantly over the course of the year.

Business-Related Fees

Individuals who own their own businesses, from small sole proprietorships to full-fledged corporations, should always have separate bank accounts in the name of the business. This makes tracking all related fees an easy task, as opposed to commingling personal and business funds. As long as attributed solely to the business, the costs of printing checks and deposit tickets, monthly maintenance and overdraft fees, incoming and outgoing wire fees, and all other charges are 100 percent deductible.

Overdraft Charges

While all overdraft charges that occur within a business account are tax deductible, any customer checks that bounce are also covered within the tax code. This includes returned deposited item fees, which are typically less than overdraft charges, as well as the entire amount of the check as a bad debt if it is not ultimately collected. Also, that bounced check may cause additional overdrafts, and no matter the cause or fault, all such fees may be deducted.

Credit Card Fees

Just as having business checking and savings accounts keeps the demarcation clear between business and personal funds and fees, credit cards should be treated in the same way. It is far easier to prove that filling up a gas tank on the way to a business conference is a viable expense if it is done with a business rather than personal credit card. All interest charges, late fees and annual fees are fully deductible. Trying to separate business and personal expenses on a pro rata basis for the purpose of determining the applicable portion of such fees can be both time consuming and inaccurate.

Other Expenses

Most banks offer a wide range of additional services, such as investment and retirement planning, that come with their own fees. Investment accounts, for example, may come with fixed annual fees or as a percentage of assets, which are fully deductible. Advisory fees fall into the same category, even if on a one-time basis that does not lead the the opening of an account. Individuals whose primary occupation is managing their investments may deduct all such fees, even if not registered as a business for that purpose.

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