Question:
I had to pay credit card swipe fees as a server. Are the fees tax deductible?
– Emily Grehawick, Server, Dockside, Norfolk, Va.
Answer:
Some states and municipalities prohibit restaurants from passing swipe fees for credit card tips on to servers. Other restaurateurs, even when it is allowed, consider those fees part of the cost of doing business, so choose not to pass them on to employees. Where it is legal to do so, your pay stub and reporting probably reflect the net of the tips received less those fees already so there would be nothing to formally deduct.
If that’s not the case, the good news, according to tax accountant Deborah Schwartz, is that you can deduct those fees as an employee business expense, similar to expenses like tools, supplies or education purchased at your expense for business use. The bad news is, it may not be worth the trouble. Schwartz says, “Unfortunately, if they go here [as employee business expenses], they have to not only be over a threshold of your income to be deductible but the itemized deductions on your return have to be greater than the standard deduction. So it's often a waste if the person does not own a home or have other high deductions.”
More on passing credit card swipe fees on gratuities to servers here.