Credit and Debit Card Fees Related to Tax Payments Are Deductible

One way to pay outstanding federal income taxes is to charge them to a major credit/debit card. The IRS does not charge a fee for this payment option. There are two authorized processors that handle tax payments: Link2Gov Corporation (www.pay1040.com) and Official Payments Corporation (www.officialpayments.com). These authorized processors charge a convenience fee of about 2.5% of the amount charged.

The IRS has ruled that the convenience fee can be deducted as a miscellaneous itemized deduction. This means you must itemize to claim the deduction and you benefit from the deduction only when total itemized deductions exceed 2% of adjusted gross income. Furthermore, if you’re subject to the alternative minimum tax, any benefit you derive from claiming the deduction is essentially wiped out.

Instead of charging taxes to a credit card, consider paying taxes via electronic transfers from your bank account. There’s no cost (unless your bank charges a fee). For details, go to EFTPS.gov (www.eftps.gov).

Source: IR-2009-37, 4/7/09