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How do I deduct are credit card fees tax deductible for businesses on my taxes?

TL;DR

Credit card fees incurred for business transactions are generally deductible as a business expense. However, personal credit card fees are not deductible.

Detailed Answer

Credit card fees are deductible when they are directly related to business transactions. This includes fees for processing customer payments, annual fees on business credit cards, and interest on business-related purchases. However, fees on personal credit cards or personal transactions are not deductible. For example, if a business owner uses a credit card to purchase office supplies, the associated processing fees can be deducted. Conversely, if the credit card is used for personal expenses, those fees cannot be deducted. It's important to ensure that the credit card is used exclusively for business purposes to claim these deductions.

Where to Put It on the Tax Form

Schedule C, Line 27a for sole proprietors or Line 20 on Form 1120 for corporations.

Real World Example

A freelance graphic designer uses a business credit card to purchase a new computer for $2,000. The credit card company charges a 3% processing fee, totaling $60. The designer can deduct this $60 fee as a business expense on their Schedule C.

Audit Risk & Documentation Tips

The audit risk for deducting credit card fees is low if proper documentation is maintained. Keep detailed records of all transactions, including receipts and credit card statements, to substantiate the business nature of the expenses. Ensure that the credit card is used solely for business purposes to avoid complications.

IRS Reference

IRS Publication 535, Business Expenses

Relevant Industries

FreelancersConsultantsRetailersService Providers

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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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