ATM Business Taxes: LLC Setup, Depreciation and Vault Cash (2026)

ATM business taxes trip people up for one reason: a machine that dispenses $15,000 in a month might earn $500. The cash your processor sends back is your own float returning; only the surcharge and interchange are income. Get that one distinction right in your books and the rest is ordinary small-business tax: pick an entity, depreciate the machines, deduct real expenses and pay estimates. This is general information as of 2026, not tax advice; a CPA who knows your state should sign off on your setup.

Part of our complete guide: business credit vs personal savings.

We will go in the order you will actually meet these questions: entity first, then what counts as income, then depreciation and deductions, then the bookkeeping that ties it together. If you also run vending, our vending LLC and tax deductions guide covers the overlapping pieces like sales tax on product.

Vault cash is not income

This is the part no general small-business article explains, so it comes first.

When a customer withdraws $100 from your machine, three things happen. The $100 leaves your cassette. The processor collects $100 plus your surcharge from the customer’s bank. The processor sends that $100 plus the surcharge, and eventually some interchange, to your settlement account, typically the next banking day.

The $100 is a return of your own cash. You put it in the machine; it came back. It is no more income than moving money from savings to checking. The surcharge and interchange are the income.

If your books record the $17,500 as sales and then try to deduct it back, you have made a mess that is hard to explain and easy to get wrong. Record the dispensed cash as a movement of your own money and only the fees as revenue.

What about information returns?

Payment platforms report on Form 1099-K only above $20,000 and more than 200 transactions in a year, the threshold the One Big Beautiful Bill Act restored in 2025. Whether and how an ATM processor reports settlement varies. If you ever receive a form that shows gross settlement including returned vault cash, do not panic and do not ignore it: your reconciliation (below) is what shows the difference, and your CPA reports it correctly. Keep processor statements for every month.

Entity: LLC first, S corp later (maybe)

Most small operators form a single-member LLC. By default the IRS treats it as a disregarded entity, so profit lands on Schedule C of your personal return. The LLC is mainly about liability separation and clean banking; it does not change your federal tax by itself.

• Get an EIN free from the IRS and open a business checking account. Use it as your processor settlement account so all ATM money flows through one place.
• Self-employment tax of 15.3% applies to most of the net profit of a sole proprietorship or single-member LLC (the Social Security part stops at an annual wage cap), on top of income tax.
• The S corp election lets you pay yourself a reasonable salary and take the rest as distributions not subject to self-employment tax. It also adds payroll, a separate return and bookkeeping costs. It generally starts to make sense only once net profit is solidly in five figures; below that, the added costs can eat the savings. Your CPA should run the numbers for your situation.
• Multi-member LLCs (a partner, a spouse in some states) file a partnership return unless you elect otherwise.

The 20% qualified business income (QBI) deduction, made permanent by the 2025 tax law, can reduce taxable income on pass-through profit for many small operators, subject to income limits. It is one reason a simple LLC is often enough for the first few years.

Depreciating the machines

An ATM is business equipment. You recover its cost through depreciation, and in 2026 you can usually recover all of it in the first year.

• Bonus depreciation. The One Big Beautiful Bill Act made 100% bonus depreciation permanent for qualifying property acquired after January 19, 2025. A $2,500 machine placed in service in 2026 can generally be written off in full that year.
• Section 179. An alternative election with a 2026 limit of $2,560,000, far above anything a small route will reach. It works a little differently from bonus depreciation (for one, it can be limited by your taxable income), which is a detail for your CPA.
• Regular MACRS. If you choose to spread the deduction out instead, ATMs are commonly treated as five-year property (some preparers use seven). Your CPA picks the class.

Expensing everything in year one is not automatically best. If your first year has little income, a large deduction may be worth more in a later, higher-income year. That is a planning question, not a rule. Also note that if you sell a machine you fully expensed, the sale price is generally taxable as recaptured depreciation.

Installation, signage and the first set of locks are usually part of the machine’s cost. Replacement parts and repairs after it is running are ordinary deductible expenses.

Deductions that belong on an ATM route

• Location commissions. The share of surcharge you pay each host. If you pay an unincorporated host $2,000 or more in 2026 (the new 1099-NEC/MISC threshold, up from $600), you generally need to issue them a 1099. Collect a W-9 when you sign the placement agreement.
• Processing and wireless fees. Per-transaction processing costs and monthly wireless or phone-line charges.
• Mileage. Trips to load, repair and pitch. The IRS standard rate for 2026 is 72.5 cents a mile for January through June and 76 cents from July 1, after a mid-year increase. Keep a log with date, purpose and miles.
• Insurance. General liability, and coverage for cash in the machine and in transit if you carry it.
• Repairs, parts, receipt paper, service calls.
• Equipment. Bill counters, a safe, locks, a cash bag. These are depreciable or expensable like the ATM.
• Professional fees. CPA, bookkeeping software, the LLC’s annual state fee.
• Theft or loss of cash. Cash stolen from a machine or in transit may be deductible as a business loss to the extent not reimbursed by insurance. Document it with a police report and your cassette log.

Interest on money borrowed for the business is generally deductible too. If you finance hardware on a business card, keep it a business card; a separate card such as Chase Ink makes it much easier to prove which charges were business.

What is not deductible: the vault cash itself. You never recorded it as income, so there is nothing to deduct when it goes out the dispenser.

Sales tax on surcharges

In most states a surcharge is a fee for a service and not subject to sales tax, but states treat fees differently. Check your state revenue department once when you start rather than assuming.

Bookkeeping that holds up

A simple monthly process covers almost everything:

1. Cassette log. For every visit: date, machine, bills in the cassette before, bills added, bills after. This is your float record.
2. Processor statement. Download it monthly. It shows withdrawals, surcharges, interchange and settlement per machine.
3. Reconcile deposits. Split every settlement deposit in your books into two lines: “return of vault cash” (withdrawal principal) and “surcharge and interchange income.” Many processors pay the fees in a separate deposit, which makes this easier.
4. Record commissions and fees as expenses when paid.
5. Check the float. Cash in all cassettes plus cash in transit plus reserve in the bank should equal the float you started with, adjusted for anything you added or withdrew. A persistent gap means a counting error, a dispense error or theft.

Step 5 is the one most operators skip, and it is how you catch a machine that is short-dispensing or a cassette count that was wrong. It also gives your CPA a clean answer if anyone ever asks why deposits were so much larger than reported income. Counting cash accurately is half the job; see our cash counting and deposit guide.

Pay quarterly estimated taxes once the route is profitable. A common rule of thumb is to set aside 25% to 30% of monthly net profit in a separate account, but your actual rate depends on your bracket and state.

An illustrative first year

Here is an illustrative example; Luis is fictional and his numbers sit inside typical ranges. Luis placed two ATMs in March 2026 for $5,000 including install, with a $4,000 float. By December the machines had dispensed about $190,000 and earned about $7,600 in surcharges and interchange. He paid $1,900 in location commissions, $1,500 in wireless, processing and insurance, and logged 1,400 business miles.

His taxable picture: $7,600 income, minus $3,400 in expenses, minus roughly $1,040 in mileage (about half the miles at each 2026 rate), minus the $5,000 machine cost if he takes bonus depreciation in full. That produces a small loss for 2026, which may offset other income, or he may choose to depreciate over time instead. None of the $190,000 appears as revenue. His $4,000 float is still his, sitting in cassettes and the bank.

Next steps

If you are pre-launch, set up the LLC, EIN and settlement account before the first machine goes in; our plan to start an ATM business with $10k puts that in week one. If you are already running, build the monthly reconciliation now rather than in April.

And if you are ready to add machines, VendBuddy finds bars, laundromats and convenience stores in any ZIP and gives you the owner’s contact, with credits you can buy one pack at a time. Every placement adds a line to your 1099 list, so collect that W-9 at signing.

Frequently Asked Questions

Is the cash in my ATM taxable income?

No. The cash you load and your processor later returns is your own working capital cycling back to you. Only the surcharge and interchange are income. Your books should split each settlement deposit into return of vault cash and fee income so the difference is documented.

Should I form an LLC for my ATM business?

Most small operators do, mainly for liability separation and clean banking. A single-member LLC is taxed like a sole proprietorship by default, so it does not change federal tax on its own. An S corp election can reduce self-employment tax once profit is well into five figures, but it adds payroll and filing costs.

Can I write off the full cost of an ATM in the first year?

Generally yes for machines acquired in 2026, because 100% bonus depreciation is permanent for property acquired after January 19, 2025, and Section 179 is also available. Whether you should depends on your income that year, since the deduction may be worth more in a higher-income year. Ask your CPA which approach fits.

Do I have to send a 1099 to the business owner where my ATM is placed?

If you pay an unincorporated host $2,000 or more in commissions during 2026, you generally need to issue a 1099. That threshold rose from $600 starting with payments made in 2026. Collect a W-9 when you sign the placement agreement so you have their details ready.

Worth reading before you sign anything: the contract walkthrough covers which terms get pushed back on and which ones you can safely give away. Commission is rarely the clause that hurts you later.

What is the IRS mileage rate for ATM route driving in 2026?

For business miles in 2026 the standard rate is 72.5 cents a mile from January 1 to June 30 and 76 cents a mile from July 1 to December 31, after a mid-year IRS increase. Keep a log of date, purpose and miles for every loading, repair and pitching trip.