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. What are the most common business deductions and expenses for small businesses?

    Learn about some of the most common business tax deductions available to small businesses that can reduce net business expenses. Read Answer >>
  2. 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 >>
  3. What are the deductions taken to determine AGI (adjusted gross income)?

    Read more about the deductions taken to arrive at adjusted gross income, or AGI, including the differences between above ... Read Answer >>
Related Articles
  1. Taxes

    How To Deduct Your Job Search Expenses

    With approximately 12 million Americans out of a job right now, many people are spending significant dollars to be noticed by potential employers. Fortunately, some of these job-search costs ...
  2. Taxes

    An Overview of Itemized Deductions

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

    5 Expenses You Want to Be Deductible But Aren't

    Here are five expenses that many taxpayers often try to claim only to find out that their deductions are denied.
  4. 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.
  5. Insurance

    What's a Deductible?

    With insurance, a deductible is the amount of money the insured pays out-of-pocket before the insurance company pays for the loss.
  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

    Explaining Taxable Income

    Taxable income is the net of gross income and allowable deductions.
  8. Taxes

    How To Calculate AGI For Tax Purposes

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

    How to Deduct Medical Insurance Premiums

    An overview of tax breaks for those who pay medical insurance premiums.
  10. Retirement

    Top Tax Tips For Retirees

    Filing your taxes during retirement can be just as time consuming as when you were employed. We have some tips to help you out.
RELATED TERMS
  1. IRS Publication 535 - Business Expenses

    A document published by the Internal Revenue Service (IRS) that ...
  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. Above The Line Deduction

    Above the line deductions are certain types of deductions that ...
  5. Interest Deduction

    A deduction for taxpayers who pay certain types of interest. ...
  6. Deduction

    Any item or expenditure subtracted from gross income to reduce ...
Hot Definitions
  1. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  2. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Down Round

    A round of financing where investors purchase stock from a company at a lower valuation than the valuation placed upon the ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment is made with the expectation of earning a return on it. This ...
Trading Center