Yes, but only certain costs tied to your business checking account count as tax deductions
You can deduct monthly maintenance fees, per-transaction fees, overdraft charges, and wire transfer fees on your business checking account. You cannot deduct the deposits themselves or the balance you keep in the account—only the fees the bank charges you for maintaining and using it. The IRS treats these as ordinary business expenses under the category of bank charges or office expenses.
The key rule is that the expense must be directly tied to running your business, not your personal finances. If you use a separate business checking account (which you should), nearly every fee qualifies. If you mix business and personal transactions in one account, you can only deduct the portion of fees that relates to business use, which is harder to prove.
Key Takeaways
- Monthly maintenance fees, transaction fees, overdraft fees, and wire transfer charges on a business checking account are all deductible as ordinary business expenses.
- You cannot deduct the money you deposit or keep in the account itself—only what the bank charges you for the account.
- Interest you earn on the account balance is taxable income, not a deduction.
- Keep bank statements and fee notices as proof of the charges you deduct, since the IRS may ask for documentation.
- If you use one account for both business and personal spending, you can only deduct the business portion of fees, which requires tracking and calculation.
Which fees you can and cannot deduct
Deductible fees include any charge the bank levies on your business account: monthly service fees, per-check charges, per-deposit charges, ACH transfer fees, wire transfer fees, stop-payment fees, overdraft fees, and fees for printed checks. These are all ordinary costs of doing business and belong on your tax return as business expenses.
Non-deductible items include the principal balance in your account (the money itself), interest earned on the account (which is taxable income instead), and any personal banking fees if you use a mixed account. Penalties from the IRS or state tax authorities also do not count as business deductions—they are separate tax liabilities.
If your bank charges a fee to close the account or charges you for inactivity, those are deductible too. The rule is simple: if the bank charged you money to maintain or operate the business account, it counts.
How to report business checking fees on your tax return
Most small business owners report bank fees on Schedule C (Form 1040) under "Office Expense" or "Bank Charges," depending on the tax software or form you use. The total goes on line 27a (Office Expense) or line 27b (Bank Charges) if you itemize them separately. If you use accounting software like QuickBooks or Wave, you can create a category for bank fees and it will pull the total into the right place on your return.
If you operate as an LLC, S-corp, or C-corp, the process is similar but the form changes. LLCs and S-corps report on Form 1120-S or 1065, while C-corps use Form 1120. Your accountant or tax software will guide you to the correct line, but the principle is the same: bank fees are a deductible business expense.
You do not need to list each individual fee separately unless you are audited. A single line item with the total annual amount is sufficient. However, you should keep your bank statements or a summary showing what fees you paid and when, in case the IRS asks for proof.
Tracking and documenting your bank fees
The simplest way to track fees is to download your bank statements each month and note the charges. Most business checking accounts show fees clearly on the statement, often grouped at the bottom or in a separate section. If you use accounting software, you can categorize each fee as it posts, and the software will total them for you at year-end.
Keep at least three years of bank statements. The IRS can audit back three years as a standard rule, and longer if they suspect underreporting. A spreadsheet with the date, fee type, and amount is helpful, but the bank statement itself is your proof. If you use a mixed personal-and-business account, document what percentage of the account is business use so you can calculate the deductible portion of fees.
If your bank charges a flat monthly fee plus per-transaction fees, both are deductible. Some banks waive fees if you maintain a minimum balance—that does not change the deduction. You still deduct any fees you actually paid.
Business checking fees versus personal banking fees
If you have a separate business checking account, all fees on that account are deductible. This is the cleanest approach and the one the IRS prefers, because it makes the business purpose obvious. A sole proprietor with a business account can deduct 100 percent of the fees without question.
If you use one account for both business and personal transactions, you must allocate the fees. For example, if your account charged $15 per month and 80 percent of your transactions were business-related, you could deduct $12 per month. This requires documentation—a log or analysis showing what portion of your account activity was business use. It is more work and more likely to draw scrutiny, which is why accountants recommend a separate business account.
Some banks offer business checking accounts with no monthly fee if you maintain a minimum balance or set up direct deposit. Even if you pay no fees, there is nothing to deduct. The deduction only applies to fees you actually incur.
Interest earned on business checking accounts
Interest your business checking account earns is not a deduction—it is taxable income. You report it on your tax return as interest income, not as an expense. If your account earned $50 in interest during the year, that $50 is income you owe tax on.
Some business checking accounts pay very little interest, especially in low-rate environments. Others, particularly money market accounts or high-yield business savings accounts, pay more. Regardless of the rate, all interest is taxable income. Your bank will send you a Form 1099-INT at year-end showing the interest paid, and you report that amount on your return.
This is different from fees, which reduce your taxable income. Interest increases it. Keep the distinction clear when you file.
What to do if you cannot find documentation of fees
If you paid bank fees but cannot locate the statements, contact your bank directly. Most banks keep records for at least seven years and can provide copies of statements or a fee summary for a specific period. You may have to pay a small fee to request old statements, but it is worth it if you need to prove the deduction.
If you remember paying fees but have no record at all, you can estimate based on your account type and the bank's fee schedule. However, this is weaker proof than actual statements. The IRS may accept a reasonable estimate if you are audited and can explain why you do not have the original documents, but a statement is always better.
Going forward, set a reminder to download and save your bank statements each month. Most banks let you download statements as PDFs directly from their website, and storing them in a folder takes almost no time. This protects you if you are ever audited and need to show what you paid.
Frequently Asked Questions
Can I deduct fees from a personal checking account if I use it for some business?
Only the portion of fees that relates to business use. If you use one account for both personal and business transactions, you must calculate what percentage was business and deduct only that share. This requires documentation and is harder to defend in an audit, which is why a separate business account is recommended.
Is the monthly fee deductible if the bank waives it because I keep a minimum balance?
No. You can only deduct fees you actually pay. If the bank waives the fee because you maintain a minimum balance, there is no fee to deduct. The money in the account itself is not deductible—only charges the bank imposes on you.
What if my business checking account is overdrawn and I pay an overdraft fee?
Yes, overdraft fees are deductible as a business expense. They are a cost of operating the account. However, you should avoid overdrafts when possible, since the fee is an unnecessary expense that reduces your profit.
Do I have to itemize bank fees on my tax return or can I lump them together?
You can lump them together as a single line item under Office Expense or Bank Charges. You do not need to list each individual fee. Keep your bank statements as backup in case you are audited, but the return itself just needs the total.
Is interest earned on my business checking account deductible?
No. Interest is taxable income, not a deduction. You report it as interest income on your return. Only fees the bank charges you are deductible as business expenses.