The short answer to whether mutual fund expense ratios are tax deductible is no. The Internal Revenue Service (IRS), prior to the Tax Cuts and Jobs Act (TCJA) signed into law in 2017, allowed certain expenses to be deducted if they exceeded 2% of the taxpayer's adjusted gross income (AGI). However, since then, no investment-related costs are tax deductible. According to Publication 529 by the IRS, investment fees and other expenses paid for managing investments are no longer deductible.

Are Mutual Fund Expense Ratios Tax Deductible?

Mutual fund expense ratios were never tax deductible. Before the TCJA, miscellaneous expenses were only deductible if they produced taxable income that can be included in your AGI.

In the case of mutual fund expense ratios, IRS rules indicated the fees paid to investment managers reduced a person's AGI and are therefore not deductible.

For example, a stock fund that returned 10% and had an expense ratio of 1% results in a taxable gain of 9%. Investment fees are already being taken out of the AGI equation so deducting them on your tax return is double-dipping.