You can claim bank charges on your tax return only when they belong to a business, a rental property, or a trust or estate. Fees on personal checking and savings accounts are not deductible, and that rule is now permanent. If an account earns income or supports a trade, the fees attached to it generally reduce your taxable income; if the account exists to manage your personal money, the fees are yours to absorb.
Personal Bank Fees Are Off the Table
Monthly maintenance charges, overdraft fees, ATM fees, and similar costs on a personal account cannot be deducted, no matter how much they total for the year. Before 2018, individual taxpayers could deduct some of these charges as miscellaneous itemized deductions, but only to the extent they exceeded 2% of adjusted gross income. The Tax Cuts and Jobs Act suspended that category for tax years 2018 through 2025.1Cornell Law Institute. Tax Cuts and Jobs Act of 2017
Many people expected the deduction to return in 2026. It did not. The One Big Beautiful Bill Act, signed in mid-2025, made the elimination permanent by recodifying it as Section 67(h) of the Internal Revenue Code: no miscellaneous itemized deduction is allowed for any taxable year beginning after December 31, 2017.2Office of the Law Revision Counsel. 26 USC 67 – 2-Percent Floor on Miscellaneous Itemized Deductions There is no workaround for personal account holders.
Business Bank Fees Remain Fully Deductible
Section 162 of the Internal Revenue Code allows a deduction for all ordinary and necessary expenses incurred in carrying on a trade or business.3Office of the Law Revision Counsel. 26 US Code 162 – Trade or Business Expenses Bank fees tied to a business account qualify. That covers monthly maintenance charges, wire transfer fees, merchant processing fees from payment processors, and foreign transaction charges on business purchases.
“Ordinary” means common in your line of work. “Necessary” means helpful and appropriate for the business. A freelance designer paying $20 a month for a business checking account and $30 per wire transfer to an overseas contractor has straightforward, defensible deductions. A sole proprietor paying credit card processing fees to accept customer payments is in equally clear territory. The IRS discontinued Publication 535 (Business Expenses) after the 2022 edition, but the underlying Section 162 rules are unchanged.4Internal Revenue Service. Guide to Business Expense Resources
Keep the Account Separate
A dedicated business bank account is the single most effective step for claiming these deductions cleanly. When one account handles both personal and business transactions, you have to allocate fees proportionally. If 60% of your transactions are business-related and 40% are personal, you can only deduct 60% of the account’s fees. That kind of allocation invites scrutiny during an audit, and the math is messy enough that mistakes compound. A separate business account costs far less each month than the trouble of defending a mixed-use split.
Rental Property Accounts
If you maintain a bank account specifically for collecting rent and paying property expenses, the fees on that account are deductible against your rental income on Schedule E. The form includes Line 19, labeled “Other,” where expenses not covered by the named categories can be listed.5Internal Revenue Service. Schedule E (Form 1040) – Supplemental Income and Loss Bank service charges and wire fees for receiving rent payments fit there. As with a business account, a dedicated rental account makes the documentation easier to produce.
Trusts and Estates
Bank fees paid by trusts and estates follow their own rule. Section 67(e) carves out an exception for administration costs that would not have been incurred if the property were not held in a trust or estate.2Office of the Law Revision Counsel. 26 USC 67 – 2-Percent Floor on Miscellaneous Itemized Deductions Custodial fees for managing trust assets, specialized charges for fiduciary accounts, and similar costs that exist only because the property sits in a trust can be deducted when computing the trust’s adjusted gross income. They sit above the line and bypass the permanent ban on miscellaneous itemized deductions.
The distinction matters. A fee you would pay regardless of whether the assets sat in a trust or in a personal brokerage account does not qualify. A fee charged specifically because the account is structured as a fiduciary or custodial arrangement likely does. Review each charge individually rather than lumping them together.
Where to Report the Deduction
The correct form depends on the business structure:
- Sole proprietors and single-member LLCs report bank fees on Schedule C (Form 1040). Part V of the form is labeled “Other Expenses,” where you list each type of bank charge with a description and amount. The total flows into the main expense section of the schedule.6Internal Revenue Service. Instructions for Schedule C (Form 1040)
- Rental property owners use Schedule E, Line 19.
- Partnerships report on Form 1065, U.S. Return of Partnership Income.7Internal Revenue Service. About Form 1065, US Return of Partnership Income
- Corporations report on Form 1120, U.S. Corporation Income Tax Return.8Internal Revenue Service. Entities 4
When listing bank fees on Schedule C, itemize the descriptions rather than posting a single lump sum labeled “miscellaneous.” Entries like “Bank Service Charges” and “Merchant Processing Fees” communicate what you paid for. A vague single line invites follow-up questions.
What You Need in Your Records
You need documentation showing what you paid, when you paid it, and why it was a business expense. Download annual fee summaries or monthly statements from your bank’s online portal, and look for specific line items like monthly service charges, wire fees, and foreign transaction charges. Keep the records for at least three years after filing the return they support, which is the standard period the IRS has to assess additional tax.9Internal Revenue Service. How Long Should I Keep Records
Digital records are acceptable, but they have to meet IRS standards under Revenue Procedure 97-22: the storage system must preserve the integrity of the records, prevent unauthorized alterations, and let the IRS retrieve and reproduce documents during an examination.10Internal Revenue Service. Rev. Proc. 97-22 A downloaded PDF statement from your bank, stored in a reliable backup, is the simplest way to satisfy that. Screenshots of a banking app fall short if the underlying data can be edited or if the screenshots lack complete transaction details.
What Happens if You Deduct Fees You Shouldn’t
Claiming personal bank charges as business deductions is one of the errors the IRS catches during small-business audits. If the deduction is disallowed, you owe the additional tax plus interest. Section 6662 also imposes an accuracy-related penalty equal to 20% of the resulting underpayment when the error is attributable to negligence or disregard of tax rules.11Office of the Law Revision Counsel. 26 USC 6662 – Imposition of Accuracy-Related Penalty on Underpayments The IRS defines negligence as any failure to make a reasonable attempt to comply with the tax code, including failing to keep records that support items on the return.
The dollar amounts on bank fees are usually modest, so the isolated penalty is small. The real risk is that a disallowed bank-fee deduction gives the examiner reason to look closely at every other expense on the return, and the audit widens from there. A separate business account and clean records are cheap protection against that.