Can I Write This Off?

Can I write off merchant processing fees?

TL;DR

Yes, merchant processing fees are generally deductible as a business expense.

Detailed Answer

Merchant processing fees are considered ordinary and necessary expenses incurred in the operation of a business. These fees are typically charged by credit card companies or payment processors for handling transactions. They are deductible as part of the cost of goods sold or as a separate business expense on your tax return. However, they must be directly related to the business and properly documented. For example, if you run a retail store and pay fees to a credit card company for processing customer payments, these fees can be deducted.

Where to Put It on the Tax Form

Schedule C (Form 1040), Part II, Line 27a for sole proprietors; or on the appropriate business tax return line for partnerships or corporations.

Real World Example

A small online retailer pays $2,000 in merchant processing fees to PayPal and Stripe for handling customer transactions throughout the year. The retailer can deduct these fees as a business expense on their Schedule C.

Audit Risk & Documentation Tips

To minimize audit risk, keep detailed records of all merchant processing fees, including monthly statements from payment processors and bank statements showing the fees deducted. Ensure that these fees are clearly separated from personal expenses and are directly related to business activities.

IRS Reference

IRS Publication 535, Business Expenses

Relevant Industries

Small BusinessRetailE-commerceFreelancers

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Disclaimer: This is for informational purposes only and should not be construed as tax or legal advice. Always consult your tax advisor.

Page created on July 7, 2025

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