Over the course of a year, American consumers can rack up plenty of bank fees. A brief moment of forgetfulness can lead to account fees, late fees or penalty fees. Anyone who has been hit with one of these fees may have considered deducting them on their tax returns, which leads us to ask: which bank fees, if any, are tax deductible?
“Unfortunately, most bank fees cannot be deducted on consumer tax returns,” said Lisa Ehrlich, a certified public accountant and accounting professor at Touro College.
There are two instances in which taxpayers can deduct a bank fee
1. When you withdraw funds from a certificate of deposit (CD) before it reaches maturity
The bank may impose an early withdrawal penalty, which is usually equivalent to several months worth of interest earnings. This penalty can be tax deducted.
2. The IRS will also allow you to deduct the rental costs of a safe deposit box
“if you use the box to store taxable income-producing stocks, bonds or investment-related papers and documents.” If the safe deposit box is used only to store jewelry, personal items or tax-exempt securities, the rental fees cannot be deducted.
Common banking fees such as monthly service fees, overdraft fees, check-writing fees and ATM fees are not tax-deductible on personal bank accounts.