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How do I deduct are transaction fees tax deductible on my taxes?

TL;DR

Transaction fees can be tax deductible if they are ordinary and necessary expenses related to your business operations.

Detailed Answer

Transaction fees are deductible as business expenses if they are directly related to the operation of your business. For example, credit card processing fees, bank transaction fees, and brokerage fees incurred in the course of conducting business are deductible. However, personal transaction fees are not deductible. It's important to differentiate between business and personal expenses to ensure proper deduction.

Where to Put It on the Tax Form

Schedule C (Form 1040), Part II, Line 27a for sole proprietors or as a business expense on Form 1120 or 1120S for corporations.

Real World Example

A small online retailer pays $500 in credit card processing fees over the year. These fees are reported as a business expense on Schedule C, reducing the taxable income of the business.

Audit Risk & Documentation Tips

Maintain detailed records of all transaction fees, including invoices and bank statements, to substantiate the business nature of the expenses. Clearly separate personal and business transactions to minimize audit risk.

IRS Reference

IRS Publication 535, Business Expenses

Relevant Industries

Small BusinessFreelancersE-commerceRetail

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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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