Can You Deduct Your Investment Expenses?
For some taxpayers, the answer is yes. But, not surprisingly, there are a couple of catches.

Examples of investment expenses include fees for investment advice, subscriptions to investment publications, and accounting and legal fees related to investment activities, among many others.

Here's one complication: Investment expenses - along with all other miscellaneous itemized deductions - are deductible only to the extent that total expenses exceed 2% of your adjusted gross income (AGI). So, if your AGI is $50,000, your miscellaneous deductions must total more than $1,000 before you can benefit from a deduction for your expenses. By identifying deductible miscellaneous expenses and bunching them into one year, you may be able to save valuable tax dollars.

In addition, the amount of your itemized deductions will be reduced after your AGI reaches a certain level. For 2009, the level is $166,800 ($83,400 for a married taxpayer filing separately). And miscellaneous itemized deductions are not allowed for purposes of computing alternative minimum tax (AMT).

Certain investment expenses are not deductible, such as travel costs and attendance fees for investment seminars, conventions, and stockholder meetings, as well as expenses you incur in generating tax-exempt income. If you paid fees that apply to both taxable and tax-exempt income, you can deduct only the expenses pertaining to your taxable investments. Trading commissions are not deductible, but must be added to your investment cost basis instead.

MFN-1109-961D

Article is for educational purposes only and is not intended to provide specific tax or legal advice. For answers to tax questions, please see your tax professional. For legal questions, consult an attorney.

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