Both individuals and businesses can take advantage of certain tax rules to deduct fees that are incurred through various credit card transactions. For example, you can deduct credit and debit card fees incurred if you paid your individual federal income taxes electronically.

Tax deductions for businesses include fees for processing charged sales, as well as annual fees on your business credit card and late fees charged by your credit card provider.

Another deduction is available if a credit card company imposes fees on your business for the service of processing charged sales. If you have a business credit card, you also qualify for deductions based on annual fees and late fees charged by your provider.

The Internal Revenue Service, or IRS, offers electronic payment systems for tax purposes, but other federal laws prohibit the IRS from directly paying any of the fees associated with debit or credit transactions. The IRS created a deduction in 2009 to offset the fee assessed by your credit card company when you make electronic tax payments. This deduction is included in your miscellaneous itemized deductions, which by law cannot exceed 2% of your adjusted gross income. However, under the new Tax Cuts and Jobs Act, many miscellaneous expenses are no longer deductible.

You can deduct any fees your credit card company charges you that is a result of paying your taxes electronically.

Deductions for Business

When your business accepts purchases through a charged credit card, the processing company imposes a fee for every swipe. The IRS lets you deduct those fees from your business taxes. If you have a business credit card and use it for business-related purchases, you can qualify for several different deductions. For one, all interest paid on the card is fully deductible. If you are assessed an annual fee, late charges, or a host of other fees, those are also fully deductible. These same privileges do not extend to individual credit cards.

Advisor Insight

Morris Armstrong, Enrolled Agent
Armstrong Financial Strategies, Cheshire, CT

If you are an individual and not a business owner, then the short answer is there are no tax deductions, unless you were charged a fee to pay your taxes with your debit/credit card. That is the 2% or 3% fee imposed by the accepting agency for processing that payment. In order to deduct that fee, you must itemize your return and it would be added to all of the miscellaneous expenses that are subject to a 2% threshold. This means that if your adjusted gross income is $50,000 and you have $1,050 in eligible miscellaneous expenses, you may get the tax benefit on $50. You may not deduct annual fees, late charges, or interest paid if you are an individual. If you are a business, then you may be able to deduct these charges.