A:

There are some investing costs that can be written off each year, even if you aren't a day trader. The general rule in determining whether an investment expense is deductible is that the expense needs to be ordinary and necessary to produce or collect income, or in the management of property used to produce income. These expenses must be directly related to the income produced such as a trading program used to generate capital gains through stock trading. Furthermore, these expenses can't total more than 2% of your total annual gross income.

Investment advice from an advisory service or consultant can be deducted as an investment expense as long as it is related to the production of taxable income. This can include a subscription to an investment newsletter or other similar service. However, investment-related seminars can't be deducted - so if you pay to attend an investment seminar, convention, or similar type of meeting, you won't be able to write off that expense. Therefore, it is unlikely that most investment courses are deductible. However, in some cases, a course may be eligible so it is important to consult the course facilitator or your accountant.

Here is a quick summary of which investment-related expenses can and cannot be written off:

Deductible:

  • Investment advice
  • Attorney and accounting fees
  • Fees from automatic investment services and dividend reinvestment plans (DRIPs)
  • Clerical help and office rent
  • Cost of replacing missing securities
  • Fees associated with the collection of income
  • Safety deposit rent

Not Deductible:

For more on the deduction of investment expenses for tax purposes see the Investment Expenses section of IRS Publication 550: Investment Income And Expenses.

RELATED FAQS
  1. Are mutual fund expense ratios tax deductible?

    Learn under what circumstances mutual fund expense ratios and other investment-related expenses may be tax deductible under ... Read Answer >>
  2. Why are capital expenses (CAPEX) treated differently than current expenses?

    Learn the difference between capital expenditures, or CAPEX, and current expenses, and determine why they are treated differently ... Read Answer >>
  3. How is the deductible I paid for my insurance claim treated for tax purposes?

    Find out how your health insurance deductible is treated for tax purposes and under what conditions you may be able to deduct ... Read Answer >>
Related Articles
  1. Taxes

    Top Tax Tips to Deduct Investment Management Fees

    Investment expenses can be deducted by those who meet three main criteria. Here's what they are and how they work.
  2. Small Business

    Writing Off the Expenses of Starting Your Own Business

    Learn how to navigate the complicated rules for writing off the expenses of starting your own business. It could save you a lot of money.
  3. Taxes

    An Overview of Itemized Deductions

    Not taking the standard deduction this year could save you hundreds of dollars.
  4. Taxes

    11 Tax Deductions You Can't Actually Write Off

    These are some of the most common tax write-offs that you can't really claim.
  5. Taxes

    10 Tax Benefits for the Self-Employed

    Running your own business has both personal and financial perks.
  6. Taxes

    Increase Your Tax Refund With Above-The-Line Deductions

    Find out about these deductions and how you can use them to lower your tax bill.
  7. Taxes

    How To Calculate AGI For Tax Purposes

    The first step in completing your taxes is calculating your adjusted gross income. Here’s how.
  8. Financial Advisor

    How to Deduct Medical Insurance Premiums

    An overview of tax breaks for those who pay medical insurance premiums.
  9. Taxes

    7 Commonly Overlooked Tax Deductions

    Don't pay more taxes than you have to because you've missed taking legitimate tax deductions. Here are just a few you may have overlooked.
  10. Taxes

    7 Expenses You Won't Believe Are Deductible

    Many taxpayers would be surprised to discover some of the things that qualify as legitimate deductions.
RELATED TERMS
  1. Deductible

    1. The amount you have to pay out-of-pocket for expenses before ...
  2. Itemized Deduction

    A deduction from a taxpayer's taxable adjusted gross income that ...
  3. Form 4952: Investment Interest Expense Deduction

    A tax form distributed by the Internal Revenue Service (IRS) ...
  4. Interest Deduction

    A deduction for taxpayers who pay certain types of interest. ...
  5. Business Expenses

    Any expenses incurred in the ordinary course of business. Business ...
  6. IRS Publication 521 - Moving Expenses

    A document published by the Internal Revenue Service (IRS) outlining ...
Hot Definitions
  1. Universal Health Care Coverage

    An organized healthcare system that provides healthcare benefits to all persons in a specified region. Many countries, such ...
  2. Davos World Economic Forum

    The annual meeting of the World Economic Forum hosted at Davos—a small ski town in Switzerland—in January each year is among ...
  3. Smart Home

    A convenient home setup where appliances and devices can be automatically controlled remotely from anywhere in the world ...
  4. Efficient Frontier

    A set of optimal portfolios that offers the highest expected return for a defined level of risk or the lowest risk for a ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the ...
Trading Center