DEDUCTIONS FOR INVESTORS

On December 22, 2017, The Tax Cuts and Jobs Act was signed into law. The information in this article predates the tax reform legislation and may not apply to tax returns starting in the 2018 tax year. You may wish to speak to your tax advisor about the latest tax law. This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.

The costs associated to your investments are deductible as a miscellaneous itemized deduction, subject to the 2% of gross income (AGI) limitation. Although they may seem trivial, it’s still worthwhile to keep track of them as they can add up quickly. Combined with other allowable deductions, they can reduce your taxable income. Keep in mind, however, that investment expenses associated with tax-exempt income are not deductible. If the expenses are associated with both, you will need to prorate the expenses. The following are typical investment expenses you can deduct:

• Investment Management Fees – You can deduct payments to a broker or an investment manager or advisor to manage your stocks and other investments.
• Investment Publications & Periodicals – Books and periodicals related to investments and investing. Newspapers and other such publications of general application are not deductible.
• Investment Travel – Traveling costs related to your investments, such as trips to your broker or investment advisor and trips to look after investment property. The costs must be reasonable, and you must be prepared to prove the reasons for your travel in case of an inquiry by the IRS.  Travel, and other expenses, to attend an investment-related meeting, seminar or convention are not deductible.
• Meals & Entertainment – One-half of the cost of your meals or entertaining costs in connection with your investments. For example, if you took your investment advisor to lunch to discuss investments.
• Legal Fees – Legal advice relating to your investments. If the legal services pertained to more than your investments, include only the portion of the fees that can be allocated to your investments.  Some legal expenses may not be deductible currently but may be used to increase your basis in the investment property.
• Professional Fees – As an example, you can deduct fees you paid to your accountant for tax advice relating to investment transactions.
• Safe Deposit Box Fees – Only to the extent that you store your investment documents.
• IRA or Keogh Custodian Fees – Provided you pay them directly to the custodian. If they are paid from the IRA or Keogh account assets, they are not deductible.
• Dividend Reinvestment – You can deduct service charges as part of a dividend reinvestment plan.
• Insurance Premiums – Cost of insurance to protect your investments.
• Home Computer Costs – If you use the computer to manage your investment activities. However, you generally must depreciate the computer using the straight-line method and allocate between investment and personal use.
• Software –The cost of software used to manage your investments. If the software has a life of over one year and the cost is $200 or more, you may need to depreciate the software.
• Office Rent – Rented property you use to manage your investments.
• Collection/Broker Fees – Paid to a broker, bank, trustee or agent to collect taxable bond and note interest or dividends. This doesn’t include broker’s commissions on the purchase or sale of securities.
• Replacing Lost or Missing Securities – If you have taxable securities (e.g., stock certificates or bonds) that are lost, stolen, destroyed or mislaid, you may have to post an indemnity bond to get them replaced. The premium to buy the indemnity bond, net of any refund if the missing securities are recovered, is deductible.