How To Deduct Credit Card Processing Fees From Taxes

Since credit card processors make a large sum of money charging businesses for their services, staying profitable can be a challenge. However, the good news is that credit card processing fees are tax-deductible if they are counted as business expenses. 

Card network processors can charge businesses flat fees as the cost of doing business, while merchants also pay processing fees that are considered as business expenses. To deduct these fees from taxes, your business needs to keep a thorough record of all the fees paid and submit a Schedule C Form or Form 1120 to the IRS. 

Tax-Deductable Credit Card Fees

Although you typically receive a 1099-K form from your card processor, this doesn’t list your processing fees. It only lists your gross income on credit and debit transactions. Because of this, you’ll need to record these expenses for accounting purposes. 

To increase your amount of capital, doing the work and deducting credit card fees can provide you with additional income down the line. In addition to transaction fees, some examples of tax-deductible fees charged by merchants include: 

  • Authorization fees
  • PCI compliance and security fees
  • Monthly or annual fees
  • Flat rate fees
  • Markup fees
  • Statement fees

To file tax deductions, your company will file either Schedule C or Form 1120 if it is a corporation. Other allowable tax deductions for your business can be found in the IRS Publication 535 to further increase your available funds for growth and expansion. 

In order to maximize your taxable deductions from business expenses, you’ll want to work with an experienced accountant who is familiar with any changes in your country’s legal regulations. This way, you’ll be able to optimize your business revenue in the long run. 

To further minimize your business expenses, we’ve put together a comparison of the top credit card processors depending on your size and industry. Read more about credit card processing on Processing Card today!

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