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Investment Fees on Illinois tax return

I'm finding conflicting information about whether I can deduct my tax advisor fees on my IL tax return. I realize that after 2017 you can no longer do that FEDERALLY, but I am wondering about on my STATE return specifically. I called Turbotax and the rep chatted with a CPA who was finding conflicting information on this in her research. The Turbotax software has a section for IL that says "you can reduce your Illinois income by the amount of expenses used to maintain investments that are not subject to tax on your federal return, but are taxable in Illinois. Also, include expenses you couldn't deduct on your federal return because you took a federal credit related to those expenses." So if I paid a 1% fee to my financial advisor to manage a traditional IRA and a 1% fee to manage a separate roth IRA are those management fees deductible? If so is that total amount what I would enter in this section?

 

Thank you!

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3 Replies
AmyC
Employee Tax Expert

Investment Fees on Illinois tax return

IL Instructions refer you to 2023 IL-1040 Schedule M Instructions which shows line 17 has expenses for federally exempt income or qualified federal credit so you may have a potential share of a brokerage fee for any exempt portion of your portfolio.

 

A traditional IRA is not federally exempt but a ROTH has the potential to go both ways.

 

The federal government for many years allowed deductions related to making money that could be taxed and many states still do. The federal is expected to have it back for 2026 and your brokerage fees may end up as an itemized deduction then.

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Investment Fees on Illinois tax return

Thank you for this information. I'm having trouble understanding the answer. So are you saying I could enter the management fees in this section of Turbotax on the state portion for the ROTH account, but not the traditional?

 

Thanks for the clarification!

RobertB4444
Employee Tax Expert

Investment Fees on Illinois tax return

Correct.  Traditionally the brokerage fees are deductible for money that is taxed, not for money that isn't.

 

@tremortime 

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