Are broker investment advisory fees deductible?

[BRN2CRZ]

My financial institution charges me 1% to manage my portfolio of both taxable (45%) and non-taxable (55%) accounts. The monthly fees are listed as either a monthly program fee or an investment advisory fee and they are paid from the IRRA non-taxable account. Are these fees deductible or can I prorate the fees to both accounts and only deduct the portion of the fees for the taxable account? Also, when I meet with my broker every quarter there is no advisory fee for the session since this is considered part of the monthly advisory fees. Can I allocate a portion of the monthly advisory fee for these advisory meetings as a deduction?

[ajfox45]

Where are they deducted on my 2018 return?

[chrissyrental]

what is mileage

[GregH]

Yes, you can deduct the 2014 investment advisory fees associated with your taxable account on your 2014 tax return. The investment management fees associated with your tax deferred accounts can not be deducted on your 2014 tax return.

Investment management expenses are a miscellaneous deduction on Schedule A (Itemized Deductions) subject to 2% of your adjusted gross income.  To enter this amount in TurboTax Delux

Select the "federal" tab, then "deductions & credits."  Then select "find deductions myself" then "other deductions & credits" then "other deductible expenses."  Say yes to the "other less common expenses" screen then you'll finally see a screen saying "enter other less common expenses."  Enter your portfolio management fees here. 

In order to get a tax benefit from this, you need to have more than 2% of your adjusted gross income in miscellaneous itemized deductions, plus you need to itemize your deductions on Schedule A.  If you owe Alternative Minimum Tax, these miscellaneous deductions are not deductible.

[saini]

This answer is INCORRECT.  I believe TurboTaxGregH did not bother to read beyond the first sentence of the question.  Davette said the fee was being paid out of a pretax account.  Therefore it is being paid with money that has never been taxed, and since it is being paid directly from the pretax account, it never will be taxed, and there is no justification for deducting it from taxable income.  The net result is the same as if Davette took money out the pretax account to pay the fee (making the money subject to tax), and then deducted the fee from taxable income.  I have consulted NUMEROUS tax experts on this point.  In order for the investment advisory fees to be deductible, they MUST be paid out of a regular account (not a 401(k), IRA or similar).  Whether the investment advisory fees are used to advise on pretax or post-tax accounts is immaterial.

[andrea-wulff]

I agree with saini that the answer by TurboTaxGregH is INCORRECT to the specific question asked. Since the original question stated that the program and advisory fees were paid from a nontaxable account, none of the fees are deductible. IN ADDITION, you may NOT use funds from within a nontaxable account to pay for fees in a taxable account without those fees paid being considered a distribution from your nontaxable account and subject to taxes, penalties and possibly even being considered a prohibited transaction invalidating the entire account as an IRA.

[fanfare]

Investment account and management fees on tax-deferred investment accounts can be deducted, as long as the fee is paid, as you indicated, from a taxable account. 

[saini]

Starting Jan. 1, 2018, under the new Tax Cuts & Jobs Act, investment advisory fees (including account management fees) are NOT tax deductible, regardless of which funds are used to pay them.  My previous answer failed to mention that, and so did several others' answers.  For years prior to 2018, they were deductible under Miscellaneous Expenses (which only were deductible to the extent that they exceeded  2% of AGI), provided the taxpayer itemizes deductions and pays them out of post-tax (not IRA/401(k)) dollars. 

[saini]

WRONG.   

See my updated answer from 12/19/2019. 

[Anonymous]

investment fees are no longer deductible after 2017

[Rick19744]

Part of the issue with this question is that it was rolled over from the "old" forum.  When that occurred it messed up the date of the actual question and responses.  This has been an issue with many questions.  Just keep that in mind since some of the responses may have been responding to "older" tax law.

[CatinaT1]

Do you have a specific question?

[Jim02]

Why are you referring to 2014.  what about 2019?

[joanne373]

thanks

[ColeenD3]

Expenses You Can’t Deduct

In addition to the expenses that are no longer deductible as a miscellaneous itemized deduction, there are expenses that are traditionally nondeductible under the Internal Revenue Code. Both categories of deduction are discussed next.

Miscellaneous Deductions Subject to the 2% AGI Limit

Unless you qualify for an exception, discussed later, you generally can't deduct the following expenses, even if you fall into one of the qualified categories of employment listed earlier.

• Appraisal fees for a casualty loss or charitable contribution.

• Casualty and theft losses from property used in performing services as an employee.

• Clerical help and office rent in caring for investments.

• Credit or debit card convenience fees.

• Depreciation on home computers used for investments.

• Excess deductions (including administrative expenses) allowed a beneficiary on termination of an estate or trust.

• Fees to collect interest and dividends.

• Hobby expenses, but generally not more than hobby income.

• Indirect miscellaneous deductions from pass-through entities.

• Investment fees and expenses.

• Legal fees related to producing or collecting taxable income or getting tax advice.

• Loss on deposits in an insolvent or bankrupt financial institution.

• Loss on traditional IRAs or Roth IRAs, when all amounts have been distributed to you.

• Repayments of income.

• Repayments of social security benefits.

• Safe deposit box rental, except for storing jewelry and other personal effects.

• Service charges on dividend reinvestment plans.

• Tax advice fees.

• Trustee's fees for your IRA, if separately billed and paid.