Standard processing fees
A typical credit card transaction fee is 2.9% + 30¢ for online card-present, similar or higher for international cards, and lower for in-person card-present transactions (1.7% to 2.9%). All of these processor fees are deductible business expenses.
Currency conversion and cross-border fees
Cross-border surcharges (typically 1%-1.5%) and currency conversion fees are deductible. Track them by reviewing the processor's fee detail report — most platforms (Stripe, PayPal, Square) provide a downloadable annual fee summary.
Chargebacks and disputes
Chargeback fees ($15-$25 per dispute) are deductible. The lost revenue from a successful chargeback is reflected in the gross receipts reduction, not as a separate deduction.
Equipment leases
POS terminal rental, card reader rental, and other payment-equipment lease payments are deductible as rent or as utilities (Schedule C line 20).
Reconciliation with 1099-K
1099-K reports gross receipts before fees. Always reconcile gross 1099-K to your books and deduct processor fees separately. Netting the fees against revenue creates an unexplained gap between reported gross receipts and the IRS-matched 1099-K total.
Where this fits in the larger Schedule C picture
Schedule C has more than two dozen named expense lines plus an "Other expenses" catch-all. For most small businesses, four or five lines drive the bulk of the deduction total — vehicle, home office, depreciation, contract labor or wages, and supplies — and the remaining lines individually contribute small amounts that nevertheless add up. Treating each named line as a recurring decision rather than an afterthought, and revisiting the categories each January, often surfaces $2,000–$5,000 in additional legitimate deductions that a less disciplined process would have missed entirely.
Documentation that survives an exam
An IRS examination of this deduction will request three things: proof of payment (bank or card statement), proof of the underlying transaction (invoice or receipt), and proof of business purpose (a contemporaneous note or calendar entry). The first two are usually trivial to produce; the third is where most filers fall short. Capturing business purpose at the moment of the expense — a one-line note in your bookkeeping software or a category and memo on the receipt-capture app — converts a generic charge into a documented deduction that will withstand scrutiny three to six years later when memory has faded.