Tax Tips: Investment Deductions

Making money off investments sometimes means you spend a little upfront. Luckily, there are tax deductions for investment expenses.

You can deduct investment expenses incurred to (a) produce or collect income or (b) manage property held for producing income. These expenses must be directly related to the income, and the income generated must be taxable.

Deductible investment expenses include:

  • Appraisal fees related to claiming a deduction for charitable contributions and casualty losses.
  • Clerical help for conservation and management of investments.
  • Custodial and maintenance fees for investment accounts.
  • Fees to collect dividends and interest (often reported on Form 1099-DIV).
  • Fees paid to investment advisers.
  • Home computer costs if you use the computer to manage your investment activities (again a log needed to show investment use) and software used to manage your investments. Generally you must depreciate hardware and software.
  • Insurance premiums on policies that protect investments.
  • Investment charts, newsletters, publications and services.
  • Investment and portfolio expenses passed through to partners and shareholders via Form K-1.
  • IRA, SEP, SIMPLE or other self-employed custodial and maintenance fees that are billed and paid separately and not deducted from the account.
  • Round-trip travel to consult with brokers and investment advisers and travel related to the conservation and management of investment property. If you use your auto you can use the standard mileage allowance for business travel.

You also may be able to deduct losses on IRA investments, if all IRA accounts have been liquidated and the total received was less than the “tax basis.”

New Jersey tax pro Robert D. Flach has been preparing 1040s for individuals since 1972.

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