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Fiction: Investment management/advisory fees are not tax-deductible.
Fact: It depends. Individuals can generally deduct ordinary and necessary expenses paid for producing taxable investment income. Such investment expenses are treated as miscellaneous itemized deductions on Schedule A and include payments for:
- Investment advisory services (counsel and advice)
- Attorney or accounting fees
- Custodial fees
- Tax advice and preparation fees
- Rental expense for a safe deposit box used to store taxable securities or investment-related papers and documents
In order to qualify for a deduction, these expenses must total more than 2 percent of adjusted gross income. The difference between the investment expenses and 2 percent of adjusted gross income may be deducted. A qualified tax professional is the best resource to determine deductibility of these fees.
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