What Investment Expenses Are Tax Deductible?

For U.S. federal income tax purposes, expenses related to the production of income are generally deductible, including expenses related to investments. Investment expenses are taken a miscellaneous itemized deduction on Schedule A of Form 1040, to the extent they exceed 2% of adjusted gross income.

According to the Internal Revenue Service (IRS) investment expenses are expenses paid or incurred to:
• Produce or collect income, or
• To manage property held for producing income.

Deductible Investment Expenses

The expenses must be ordinary and necessary, must be directly related to the income or income-producing property, and the income must be taxable.

Some examples of the types of investment expenses that can be deducted include:
• Investment counseling and advice,
• Legal and accounting fees,
• Investment newsletters,
• Charges for automatic investment services and dividend reinvestment plans,
• Clerical help and office rent,
• Fees paid to brokers, banks, trustees, or other agents to collect income (but not to purchase or sell investments - these are added to the basis in the case of purchases, and deducted from the amount realized in the case of sales),
• Safe deposit box rental, if you use it to keep stock certificates or investment-related documents
• Premiums on indemnity bonds to replace securities that are mislaid, lost, stolen, or destroyed,
• Trustee's commissions for managing a revocable trust, and
• Investment expenses from pass-through entities, such as partnerships, S corporations, or real estate mortgage investment conduits (REMICs). Partnerships and S corporations will report these expenses on Schedule K-1.

If you use a home computer partially for managing your investments, you may be able to claim a depreciation deduction, apportioned based on the percentage of time you use the computer for managing investments. You must be able to justify this deduction.

Non-Deductible Investment Expenses