Deducting Investment Advice
Are your fees tax deductible?
Tax Deductions
Certain investment and tax advice are tax deductible on your tax return depending on whether or not you itemize on your return and you meet 2 % limitation amount.
Financial planning fees in general are non-deductible, however advice related to investment or tax planning including estate planning are deductible.
If you receive a bundled invoice covering several areas of financial planning, ask your adviser to unbundle the services and list items separately to determine what is deductible or not.
As a general rule the following three sections will determine if a fee is deductible:
For the production of income.
For the management or maintenance of property held for the production of income.
Tax or estate planning discussions.
Any of the above fees are generally claimed as miscellaneous itemized deductions subject to 2 % of AGI floor.
Any fees charged related to your IRA or 401k accounts can be deducted, however the expense must be paid outside of the accounts otherwise the amount paid could be considered a withdrawal (distribution) subject to income tax and possible penalty if younger than 59 ½ years of age.
Keep detailed records of any tax or investment fees paid during any calendar year and seek tax advice if needed.
Keep in mind – your deductions must exceed your standard deduction otherwise the fees will not benefit you in any way.
Commissions paid to a broker are not deductible, they are added to your cost basis of your investment for tax purposes.
As mentioned in previous posts, seek professional advice when dealing with investment or tax issues.
Daniel Iuculano, AAMS CMFC
Accredited Asset Management Specialist
Chartered Mutual Fund Counselor
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