Individuals may not deduct fees for credit cards used to pay personal income tax.

• Author: Fiore, Nicholas J.

Temp. Regs. Sec. 301.6311-2T(a) provides that taxes may be paid by debit or credit card as authorized under these regulations. Temp. Regs. Sec. 301.6311-2T(e) provides that the government may not impose any fee or charge on persons making payment of taxes by debit or credit card. This does not prohibit the imposition of fees or charges by the cards' issuers or by any other financial institution or person participating in the transaction.

Sec. 212(3) provides that, for an individual, there shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the tax year in connection with the determination, collection or refund of any tax. Regs. Sec. 1.212-1(1) states that expenses paid or incurred by an individual in connection with the determination, collection or refund of any tax, whether the taxing authority be Federal, state or municipal, and whether the tax be income, estate, gift, property or any other tax, are deductible. Thus, expenses paid or incurred by a taxpayer for tax counsel or expenses paid or incurred in connection with the preparation of the taxpayer's tax returns, or in connection with any proceedings involved in determining the extent of the taxpayer's tax liability or in contesting the taxpayer's tax liability, are deductible.

Although the legislative history on Set:. 212(3) is brief, S. Rep. No. 1622 provides that Sec, 212(3) is designed to permit an individual's deduction of legal and other expenses paid or incurred in connection with a contested tax liability, whether the contest be Federal, state or municipal taxes or whether the tax be income, estate, gift, property and so forth. Any expenses incurred in contesting any liability collected as a tax or as a part of the tax will be deductible.

Sec. 262 provides that, except as otherwise provided, no deduction shall be allowed for personal, living or family expenses. Regs. Sec. 1.262-1(b) further provides some examples of personal, living and family expenses, such as (1) premiums paid for life insurance by the insured, (2) cost of insuring a dwelling owned and occupied by the taxpayer as a personal residence and (3) expenses of maintaining a household.

In Rev. Rul. 89-68, the Service concluded that fees paid for the preparation and submission of a ruling request on the deductibility of a medical care expense, and the user fee paid in connection with the ruling request, were paid in connection with determining the extent of the individual's...