Having a business bank account is requirement for many entrepreneurs, however, banking can be costly. The fees your bank may charge including but not limited to wire transfer fees, check fees, overdraft fees, and service charges can add up. Since these costs are a normal part of doing business generally these fees will be deductible when you prepare your business tax return at the end of the year.
Tim is a tasker who specializes in home improvements. He does a good job separating his business and personal activities since he has two separate bank accounts. Last year, Tim incurred a number of one time expenses but did not work on many improvement projects. Accordingly, Tim racked up $100 in overdraft fees. Since Tim separated his personal and business funds he could easily substantiate that the overdraft fees were related to his business and therefore deduct these fees on line 10 or 27a of his Schedule C.
Earlier this year Chris started his own messenger and delivery business. Often times Chris uses his bank card to make purchases for customers prior to being reimbursed upon delivery. Recently, Chris has been making purchases from a number of stores that only accept cash and as a result he has been incurring over $40 per week in ATM fees. As long as Chris can show that the ATM charges were for business purposes he will be able to deduct these fees when he files his taxes at the end of the year (regardless of whether or not he passes them on to his customers).
Selena owns multiple properties which she rents through Airbnb and independently. Selena pays $125 per year to keep the deeds to all of her rental properties in a safe deposit box at her local bank. Since her safe deposit box is used only to support her rental business, she will be allowed to deduct the $125 fee on line 19 of her Schedule E.
Agnes is a freelance web developer who will often contract out part of her projects to overseas teams. Typically, she pays her contracted development teams via wire transfer when they complete their work. Last year Agnes incurred $820 of wire transfer fees paying various developers. When Agnes prepares her tax return, she will be able to deduct the full $820 of wire transfer fees on her Schedule C.
Sederoff is an Sidecar driver who uses one bank account for both his Sidecar and personal activities. During the year, Senderoff incurred $200 of bank fees including overdraft fees, service fees and transfer charges. He would like to deduct all of his bank charges on his Schedule C, however, his tax advisor informed him that he would not be able to do so unless he could support which bank charges were directly related to his business activities.
