Most bank fees are not deductible, but some are if you itemize and meet specific conditions

The short answer: most bank fees—overdraft charges, monthly maintenance fees, ATM fees—cannot be deducted on your federal tax return. The IRS treats them as personal expenses, not business or investment costs. However, if you use a bank account for business purposes, fees tied directly to that account may be deductible as a business expense. The key is whether the fee relates to earning income or managing an investment.

The rules changed significantly in 2017. Before that, miscellaneous itemized deductions (including some bank fees) were allowed if you itemized. Now, most personal bank fees fall into a category the IRS no longer allows. If you own a business or manage rental property, the situation is different—those fees can reduce your taxable income as business expenses.

Key Takeaways

  • Personal bank fees—overdraft, maintenance, ATM charges—are not deductible on your individual tax return under current IRS rules.
  • Bank fees charged to a business account are deductible as a business expense if you report business income on Schedule C or another business form.
  • Fees for managing investment accounts or custodial accounts may be deductible if you itemize deductions, but only in narrow circumstances.
  • Keeping receipts and statements that show which account the fee was charged to helps you separate business fees from personal ones.

When a bank fee might be deductible: business and investment accounts

If you are self-employed or own a business, bank fees charged to your business account are deductible. This includes monthly maintenance fees, wire transfer charges, check printing, and overdraft fees on that account. You report these on Schedule C (Profit or Loss from Business) or the appropriate business tax form. The fee must be tied to the account you use for business income and expenses.

Investment account fees are more limited. If you pay a fee to a custodian or trustee to manage a traditional IRA, SEP-IRA, or other retirement account, that fee may be deductible—but only if you pay it separately from the account itself. If the custodian deducts the fee directly from your account balance, it is not deductible. You must pay the fee out of pocket and report it on Form 8949 or Schedule A (if you itemize). This applies only to IRAs and certain other retirement accounts, not regular investment accounts.

Rental property owners can deduct bank fees for accounts used to manage rental income and expenses. If you have a separate account for rent collection and property maintenance payments, fees on that account reduce your rental income.

Why personal bank fees stopped being deductible in 2017

Before 2018, you could deduct miscellaneous itemized deductions if they exceeded 2% of your adjusted gross income. Bank fees, tax preparation fees, and investment advisory fees fell into this category. The Tax Cuts and Jobs Act eliminated this deduction for tax years 2018 through 2025. Even if you itemize, you cannot deduct personal bank fees.

This change affects most people with regular checking or savings accounts. Overdraft fees, monthly maintenance charges, and ATM fees from your personal bank account are now treated the same way the IRS treats other personal expenses—they reduce your after-tax money but not your taxable income.

How to track which fees are deductible and which are not

The distinction between business and personal accounts matters for your tax records. If you have both a personal checking account and a business account, keep statements that clearly show which fees were charged to which account. Your bank statement will list the account number and type (personal or business) at the top.

For business owners, save monthly statements or download a transaction history showing all fees. When you prepare your tax return, add up the fees charged to the business account and report them as a business expense. Do not mix personal and business fees together.

If you pay an investment account fee out of pocket (not deducted by the custodian), keep the receipt or bank statement showing the payment. You will need this when you file, because the deduction is only allowed if you can show you paid it separately.

What happens if you deduct a fee you should not have

If you claim a personal bank fee as a deduction and the IRS audits your return, you will owe the tax you saved plus interest. The IRS will disallow the deduction and recalculate your tax liability. If the error was unintentional, you may not face a penalty, but you will owe back taxes with interest from the original due date.

The safest approach is to ask yourself: did this fee come from a business account, a rental property account, or an investment account where I paid the fee separately? If the answer is no, do not deduct it. If you are unsure, a tax professional can review your account statements and advise you on what qualifies.

State and local taxes: a different set of rules

Some states allow deductions for bank fees that the federal government does not. A few states still permit miscellaneous itemized deductions, including bank fees, even though the federal deduction ended. Check your state's tax form instructions or contact your state revenue department to see whether bank fees are deductible on your state return.

If you live in a state with an income tax and you itemize on your state return, you may be able to deduct personal bank fees there even if you cannot on your federal return. This is rare, but it is worth checking if you pay significant fees.

Frequently Asked Questions

Can I deduct overdraft fees on my personal checking account?

No. Overdraft fees on a personal account are not deductible on your federal tax return. If the overdraft fee was charged to a business account, it is deductible as a business expense.

What if my bank charges a monthly maintenance fee?

Monthly maintenance fees on a personal account are not deductible. If the account is used for business, the fee is deductible. Some banks waive maintenance fees if you maintain a minimum balance or set up direct deposit, which may be a better option than trying to deduct the fee.

Are investment advisory fees deductible?

Investment advisory fees paid to a financial advisor are generally not deductible. However, fees paid to manage a traditional IRA or SEP-IRA may be deductible if you pay them separately (not deducted by the custodian). Regular investment account fees are not deductible.

Can I deduct wire transfer fees if I use them for business?

Yes. Wire transfer fees charged to a business account are deductible as a business expense. Keep your bank statements to show the fees were charged to the business account.

Do I need to itemize to deduct business bank fees?

No. Business bank fees are deducted on your business tax form (Schedule C or equivalent), not as an itemized deduction. You report them whether you take the standard deduction or itemize.