Are Bank Overdraft Fees Tax Deductible?

Timely deposits and accurate record-keeping minimize overdraft risks.
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When you write a check or make a debit card purchase for an amount that exceeds your account balance, you may face an overdraft charge. These fees are not deductible on individual tax returns, though self-employed people can often deduct them as a business expense.


Overdraft Fee Basics

The typical fee for an overdraft charge is $35 per transaction, according to a June 2012 "Forbes" article. You can avoid these charges by declining overdraft services on your account. Or you can link your checking account to a savings account, though you will pay a small amount each time money is pulled to cover the overdraft.


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When to Deduct

While individuals can't deduct most standard bank charges, small-business owners often can when the expense is business related. You simply recognize the overdraft fee as a business expense and report it as such when you file your tax return. It is generally best to keep a separate bank account for your business if you intend to deduct such fees, according to My Bank Tracker. Court cases have deemed excessive deductions not necessary or ordinary business expenses. For the typical small-business owner with modest fees, though, this isn't a concern.