Expense category
What tax category is merchant processing fees?
Merchant processing fees normally fall under Commissions & fees. This is because these fees are directly related to the business's income from sales, making them a type of fee associated with earning that income. However, if the business owner uses the card for personal purchases, the fees would be considered a draw against equity.
STRIPE PROCESSING FEECategory
6010Commissions & fees
Schedule C, line 10
Confidence
95%
- Decided by
- a vendor rule
- Deductible
- Generally deductible
- Why
- matched seed rule 'stripe processing'
When categorizing merchant processing fees, it's essential to consider the business's use of the card. If the card is used primarily for business purposes, the fees are a legitimate business expense. However, if the card is used for personal purchases, the fees are not deductible as an expense.
A common mistake people make is not separating business and personal use of the card. If the card is used for both business and personal purposes, the business owner must allocate the fees between the two categories. This can be done by keeping track of business-related transactions and separating them from personal purchases.
Personal use mistake
Fees for personal purchases are not deductible.
Business use only
Fees for business use are a legitimate expense.
Separate business and personal
Keep track of business and personal transactions to allocate fees correctly.
Categorize your own transactions
This page asked the same engine your books would. Run it over a whole year of statements and receipts and get the categories, the reconciliation and the fix list.
Questions people ask
- What happens if I use the card for both business and personal purposes?
- You must allocate the fees between the two categories by keeping track of business-related transactions and separating them from personal purchases.
- Can I deduct the fees if I use the card for business purposes?
- Yes, if the card is used primarily for business purposes, the fees are a legitimate business expense.
- Are merchant processing fees a type of income?
- No, merchant processing fees are a type of expense associated with earning income, not a type of income itself.
Merchants that land in categories like this
More in expense categories
General information about how bookkeeping and Schedule C categorization work — not tax advice. BookkeeperLens is a demo running on synthetic data.