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Is my credit card processing discount rate, transaction fee, etc. deductible?

  • My business (s-type) has a merchant account to process credit cards. I pay a monthly fee ($50 or so a month), a discount rate (percentage per transaction) and a transaction fee (like $.25). My question is if I can count any of these three fees as a deduction on my 1120s? If so, what kind of deduction would it/they be classified as? A reputable page explaining why they are or aren't would be preferred. I'm going to have a CPA file my taxes for me, but I would like to know now if I should be keeping a running total of these fees that I am paying or if it isn't necessary because they arn't deductible. Thanks!


  • wannarun-ga: Thanks for inviting me to post this Answer. Generally speaking (which is about all that one can do when speaking about the IRS, since *everything* is subject to specific intepretation should they choose to take a deeper look at any individual or business), all legitimate business expenses incurred in order to conduct a legitimate business transaction, are deductible. That's a long-winded way of saying that if you incurred the expense necessarily in order to sell a good or service, then you can claim the expense as a deduction from your gross income. Merchant account fees and payment processing fees definitely fall into this category, as discussed in the thread I referenced: http://www.businessownersideacafe.com/cyberschmooz/FinancialFeasts/3140.html Your CPA will be the best guide of course when you file your actual return. Again, generally speaking, as long as the fees don't cause you to be losing money on every sale of a good or service (the IRS will question why you stay in business if that is the case), then the fees are a legitimate business expense. Regards, aht-ga Google Answers Researcher


  • Here is an additional resource that you may find useful: http://www.nolo.com/lawcenter/ency/article.cfm/objectID/B407A867-3EE5-410F-8718C78B2EF698D6 As this article states, the IRS will allow "ordinary" and "necessary" expenses as deductions... however, the IRS has not defined "ordinary" and "necessary", leaving it up to the courts to figure out on their own. Fees incurred to process payments have usually been deemed "ordinary" and "necessary".


  • Thats good enough for me! Post a blank answer and you got the $10.


  • You may find this related message thread helpful: http://www.businessownersideacafe.com/cyberschmooz/FinancialFeasts/3140.html In your case, perhaps you can clarify what you would accept as 'proof' that such fees either are, or are not, deductible? Thanks, aht-ga Google Answers Researcher







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