Can you deduct payment processor chargebacks?

Yes—generally you can deduct the business costs tied to a payment processor chargeback, but the treatment depends on what part of the chargeback you mean.

In general:

• The disputed sale amount: If the chargeback reverses a sale you previously counted as income, you usually don’t deduct it as a separate expense; instead, you reduce your sales or gross receipts, or otherwise reverse the income under your accounting method.
• Processor chargeback/dispute fees: Fees charged by the payment processor for handling the dispute are usually deductible as ordinary and necessary business expenses, often booked as merchant fees, bank fees, or similar.
• Inventory or goods not returned: If you shipped physical goods and they weren’t returned, the tax treatment is usually handled through cost of goods sold or inventory accounting, depending on how your books are set up.

This is general U.S. tax guidance only. The right treatment can vary based on whether you use cash or accrual accounting, whether the chargeback happened in the same tax year as the sale, and whether the transaction involved goods, services, or digital products. If you want the safest treatment for your business, check with a CPA or tax preparer using your bookkeeping method and the processor’s statements.