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Q: Is my credit card processing discount rate, transaction fee, etc. deductible? ( Answered 5 out of 5 stars,   0 Comments )
Subject: Is my credit card processing discount rate, transaction fee, etc. deductible?
Category: Business and Money > Accounting
Asked by: wannarun-ga
List Price: $10.00
Posted: 25 Oct 2004 13:58 PDT
Expires: 24 Nov 2004 12:58 PST
Question ID: 419942
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

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.


Request for Question Clarification by aht-ga on 25 Oct 2004 14:57 PDT
You may find this related message thread helpful:

In your case, perhaps you can clarify what you would accept as 'proof'
that such fees either are, or are not, deductible?


Google Answers Researcher

Clarification of Question by wannarun-ga on 25 Oct 2004 15:37 PDT
Thats good enough for me!

Post a blank answer and you got the $10.
Subject: Re: Is my credit card processing discount rate, transaction fee, etc. deductible?
Answered By: aht-ga on 25 Oct 2004 15:44 PDT
Rated:5 out of 5 stars

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:

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.


Google Answers Researcher

Clarification of Answer by aht-ga on 25 Oct 2004 15:48 PDT
Here is an additional resource that you may find useful:

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".
wannarun-ga rated this answer:5 out of 5 stars
Thank you!

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