Bank Charges & Business Interest — United States Tax Rules

Deduct bank fees, payment processor fees, and business loan interest on Schedule C Line 16b — keep personal and business accounts separate.

Claimable: Fully claimable · Tax authority: IRS (Internal Revenue Service)

IRS (Internal Revenue Service) Rules

• Business bank fees and interest are deductible on Schedule C Line 16b (Business Interest & Bank Charges).
• Deductible: monthly account maintenance fees, wire transfer fees, overdraft fees on business accounts, foreign transaction fees for business transactions.
• Deductible: payment processor fees (Stripe, Square, PayPal Business, QuickBooks Payments).
• Deductible: interest on a business loan or line of credit used for business purposes.
• NOT deductible: interest on personal loans used for personal purposes, personal credit card interest.
• Mixed-use loan: if you use a personal line of credit partly for business, deduct only the business-use proportion of interest.
• Keep business and personal accounts completely separate — commingling funds makes it difficult to prove business expenses.
• Business credit card annual fees and interest: deductible on Line 16b.

Limits

No annual dollar cap for ordinary business bank charges and interest. Excess Business Loss rules may limit interest deductions in some cases — consult a CPA.

Worked Example

Alex, a freelance consultant, pays: business checking monthly fee $15/month = $180/year; Stripe payment processing fees 2.9% on $120,000 revenue = $3,480; business credit card interest $450; wire transfer fees $85. Total deductible: $4,195 on Schedule C Line 16b.

Record Keeping

• Keep monthly business bank statements showing fee charges
• Retain Stripe, Square, or PayPal monthly fee statements
• Keep loan statements showing the interest component separately from principal
• Maintain separate business and personal bank accounts to simplify record-keeping

Frequently Asked Questions

Can I deduct Stripe or PayPal processing fees?

Yes — payment processor fees paid to Stripe, Square, PayPal Business, Venmo Business, or similar platforms are 100% deductible as bank charges on Schedule C Line 16b. These are ordinary and necessary costs of accepting client payments.