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Can you write off are credit card processing fees tax deductible?

TL;DR

Yes, credit card processing fees are generally tax deductible as a business expense, provided they are directly related to business transactions.

Detailed Answer

Credit card processing fees can be deducted as a business expense if they are incurred in the course of running your business. These fees are considered ordinary and necessary expenses under IRS guidelines. For example, if you run a small online store and pay a percentage of each sale to a payment processor like PayPal or Stripe, these fees are deductible. However, fees related to personal transactions or non-business activities are not deductible. It's important to ensure that the fees are directly tied to your business operations and properly documented.

Where to Put It on the Tax Form

Schedule C, Line 27a (Other expenses)

Real World Example

A freelance graphic designer who uses a payment processor to receive payments from clients incurs $500 in processing fees over the year. These fees are deductible on Schedule C as they are directly related to the business income.

Audit Risk & Documentation Tips

Audit risk is low if properly documented. Keep detailed records of all transactions, including invoices and statements from payment processors. Ensure that the fees are clearly identified as business-related. Retain copies of contracts or agreements with payment processors that outline the fee structure.

IRS Reference

IRS Publication 535, Business Expenses; IRC §162.

Relevant Industries

Small Business OwnersFreelancersE-commerceConsultants

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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 15, 2025

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