For U.S. federal taxes, payment-processing fees a freelancer pays for business transactions can generally be deductible as ordinary and necessary business expenses. That applies the IRS’s general expense rule; Publication 334 does not specifically list every type of processor fee. Personal charges are not deductible, and the appropriate Schedule C treatment depends on what the fee was for and the instructions for the filing year.
When payment-processing fees can qualify
The IRS says a deductible business expense must be both ordinary—common and accepted in the taxpayer’s trade or business—and necessary—helpful and appropriate for it. Publication 334 lists bank fees among expenses a small business may be able to deduct. Applying that rule to charges for processing a freelancer’s business payments is a reasonable interpretation, rather than an example the IRS names specifically. IRS Publication 334 (2025)
The business connection matters. A fee charged to accept a client’s card payment is different from a personal account or transaction charge. If a charge covers both business and personal use, allocate it and claim only the business share; personal expenses generally are not deductible. IRS guidance on income and expenses
Where to report fees on Schedule C
Sole proprietors generally use Schedule C to report business or professional income and loss. The 2025 Schedule C instructions direct taxpayers to report commissions and fees on line 10, subject to exceptions for amounts capitalized or deducted elsewhere. This makes line 10 a possible location for routine payment-processing charges, not a universal answer for every processor fee. Check the instructions for the tax year you are filing and consider the nature of the charge. About Schedule C · 2025 Instructions for Schedule C
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Do not confuse routine processing with property-sale fees
The 2025 instructions also say commissions and other fees paid to facilitate a property sale may need to be capitalized, with an exception for dealers in property. Those costs are not automatically treated like routine charges for processing customer payments.
How Form 1099-K relates to processor fees
Form 1099-K reports gross payment amounts for payment-card and third-party-network transactions. The IRS says freelancers and other self-employed taxpayers generally report Form 1099-K payment information on Schedule C and should keep records supporting income and deductible expenses. The form’s gross amount should not be assumed to equal the net deposits after processor fees. IRS guidance on what to do with Form 1099-K
Use processor statements, transaction reports, and your bookkeeping to reconcile the gross payments with fees, refunds, and the amount deposited. The relevant IRS guidance establishes the gross-payment point but does not prescribe a processor-specific reconciliation example.
Records to keep
Keep records that show both the amount of the charge and its connection to your business. Useful records include processor statements or fee summaries, invoices or transaction reports, and bookkeeping records that reconcile payments and deposits. The IRS advises keeping records to support income and deductible expenses. IRS Form 1099-K guidance
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A deduction reduces taxable business profit; it does not reimburse you for the full fee. The value depends on your overall tax situation, so there is no universal savings amount or rate.
This guidance addresses U.S. federal treatment, particularly sole proprietors reporting on Schedule C. State, local, and other countries’ tax rules may differ. For a particular filing, consult the instructions for that tax year and the rules that apply where you file.
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