I have federally tax-exempt interest dividends that get taxed as Illinois income. Under the TT interview, it asks "Any Deductible Expenses?" In 2021, did you pay any expenses that:Were used to maintain investments that are exempt from federal tax, but are taxable to Illinois?Were disallowed on your federal return because you took a credit for them?"Are the "advisory fees" I paid to my brokerage account throughout 2021 that held this asset that generated the subject income a deductible expense per the first bullet? Thanks - Carris

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Investment Deductions for State Filing

Forum|Forum|4 years ago
February 21, 2022
3 replies
55 views

I have federally tax-exempt interest dividends that get taxed as Illinois income. Under the TT interview, it asks "Any Deductible Expenses?" In 2021, did you pay any expenses that:

Were used to maintain investments that are exempt from federal tax, but are taxable to Illinois?
Were disallowed on your federal return because you took a credit for them?"

Are the "advisory fees" I paid to my brokerage account throughout 2021 that held this asset that generated the subject income a deductible expense per the first bullet?

Thanks - Carris

Best answer by JohnW152

You can take, as a subtraction against Illinois income, the portion of the $1,000 that relates to the portion of your investment that was exempt from federal tax, but taxable by Illinois.

If your entire portfolio is the federally tax-exempt income, you can claim the entire expense. If, say, 25% of the portfolio is reflected by this income, you can claim 25%. Make a reasonable estimate.

See Schedule M IL-1040 Instructions for more information.

AliciaP1

Alumni - Intuit

Yes, if the expenses were necessary to maintain the account they are deductible against the dividend income from the investment.

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carriskoulAuthor

Level 4

Thank you AliciaP1.

This was the fee the brokerage charged as a percentage of my portfolio value. So if let’s say I paid the brokerage $1,000 to manage my portfolio for the year, then I can deduct that $1,000 on my state return even though the dividend income was from a portion of the portfolio. Is this correct?

JohnW152Answer

Alumni - Intuit

You can take, as a subtraction against Illinois income, the portion of the $1,000 that relates to the portion of your investment that was exempt from federal tax, but taxable by Illinois.

See Schedule M IL-1040 Instructions for more information.