Investment Advisor Fees Tax Deduction

No matter how these qualifying investment management fees are paid meaning whether the fee is implicit or explicit in the investor s tax picture the net results are the same.

Investment advisor fees tax deduction. This applies to investment fees as well as interest costs. Leave your question for jason. Unfortunately a lot of households can t avail themselves of the deduction because the rules are the same as for the investment advisory fee tax deduction only those fees in excess of 2 of your adjusted gross income are deductible. Because of the investment interest expense deduction mary s taxable income has been reduced from 150 000 to 129 000.

Losing out on the investment expense deduction might be a tough pill to swallow for investors who pay hefty fees to have their investments actively managed. That s why interest on an rrsp loan isn t tax deductible but interest on a loan to invest in a non registered account may be. In summary the main income tax deduction for financial or investment advice relates to investment management fees for a non registered account patti. They fell into the category of miscellaneous itemized deductions and these deductions were eliminated from the tax code by the tax cuts and jobs act tcja effective tax year 2018.

The fees you pay for tax preparation are miscellaneous deductions. But most taxpayers won t see much difference in their returns especially since fewer people are itemizing thanks to the tcja s higher standard deductions. What follows is an example of the tax and investment consequences for an individual at a 45 tax rate who pays investment fees indirectly or directly. The tax cuts and jobs act of 2017 commonly referred to as tcja eliminated the deductibility of financial advisor fees from 2018 through 2025.

Thus investment management fees charged by an ria i e the classic aum fee are deductible as a section 212 expense along with subscriptions to investment newsletters and similar publications along with any service charges for investment platforms e g custodial fees dividend reinvestment plan fees under subsection 1 or 2 above or any other form of investment counsel. The tax cuts and jobs act of 2017 eliminates this deduction 2018 2025. Qualified dividends qualified dividends that receive preferential tax treatment aren t considered investment income for purposes of the investment interest expense deduction. The miscellaneous itemized deduction including tax deductions for tax preparation fees investment expenses union dues and unreimbursed employee expenses are eliminated.