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. 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 >>
  4. 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 >>
  5. What are the most common operating expenses for an online business?

    Learn about the common expenses of online businesses and find out about some of the tax implications of new business expenses ... Read Answer >>
  6. Are estate planning fees tax deductible?

    The costs of estate planning can be significant. Are any of these expenses deductible to the taxpayer or are they merely ... 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. Taxes

    An Overview Of Itemized Deductions

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

    Are Your Job Search Expenses Deductible?

    Looking for a job can be expensive. While some of the costs can be deducted, the IRS will not blindly sign off on them.
  6. Taxes

    10 Tax Benefits For The Self-Employed

    Running your own business has both personal and financial perks.
  7. 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.
  8. Taxes

    Top Tax Deductions For Brokers

    If you are paying out of pocket, you can make your business expenses work for you at tax time.
  9. 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.
  10. Taxes

    Tax Deductions For Rental Property Owners

    The IRS defines a real estate professional as someone who works more than half of her time in the business, and more than 750 hours per year working on her properties.
RELATED TERMS
  1. IRS Publication 535 - Business Expenses

    A document published by the Internal Revenue Service (IRS) that ...
  2. Deductible

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

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

    A tax form distributed by the Internal Revenue Service (IRS) ...
  5. Above The Line Deduction

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

    A deduction for taxpayers who pay certain types of interest. ...
Hot Definitions
  1. Federal Direct Loan Program

    A program that provides low-interest loans to postsecondary students and their parents. The William D. Ford Federal Direct ...
  2. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  3. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  4. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  5. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  6. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
Trading Center