Tax Deductions for Investment Advice
Original post by Shula Asher Silberstein of Demand Media
If you receive returns on your investments, you must pay taxes on those returns. However, the Internal Revenue Service (IRS) allows you to deduct certain expenses related to your investment income. Although not all of your investment expenses are deductible, most expenses related to getting investment advice are. Your deduction is limited by how much money you make.
You can deduct investment expenses as miscellaneous expenses as long as your deduction doesn't exceed more than 2 percent of your adjusted gross income. For example, if your adjusted gross income is $60,000, you can deduct up to $1,200 in miscellaneous expenses. Investment advice is considered a deductible investment expense as of August 2011, so you can deduct any fees for investment counseling or financial planning sessions.
Transportation to and from your investment adviser's office is a deductible miscellaneous expense. Keep track of your miles if you drive so that you can take a mileage deduction and save any parking receipts or receipts for taking public transportation. You cannot deduct transportation to and from stockholders' meetings, however, even if you only went to the meeting because your adviser suggested you see what you think of the company.
If your adviser talks to you about tax-exempt investments, you cannot deduct your advising fees for these sessions. For example, if you meet with your adviser to talk about investing in tax-exempt mutual funds, you cannot deduct the fees he charges for this advising session. If you've met with your adviser to discuss both tax-exempt and taxable investments over the year, you must prorate your deduction based on the ratio of tax-exempt investment income to taxable investment income in your portfolio.
Other Investment Expenses
You may deduct certain other investment expenses besides your adviser fees as miscellaneous deductions. If you pay for accounting software or for an automatic investment plan, these fees are deductible. You may also deduct the rental fee for a safe deposit box to store valuables related to your investment such as certificates of deposit and any attorney's fees related to your investments. If you pay out-of-pocket for custodial fees for your IRA or Keogh retirement account, you may deduct these fees as well.
- Schwab.com; Investment Expenses - What's Tax Deductible?; Rande Spiegelman; June 2011
- IRS.gov: Publication 550 Investment Income and Expenses
About the Author
Shula Asher Silberstein has been writing fiction and nonfiction since 2006. He writes about social issues, especially those of concern to the LGBTQ community. He has written a novel, "Shades of Gay." Silberstein holds a Master of Fine Arts in screenwriting and fiction from the University of Southern California.