Other Investment Expenses

You can deduct, as a miscellaneous itemized deduction, investment expenses you incurred to produce, manage, or collect income, dividends, gains, losses, etc. that are taxable to you.

The catch is that, like all miscellaneous deductions, the portion that is equal to 2 percent of your AGI will not be deductible. In addition, at higher levels of income, your hard-won and carefully documented itemized deductions will be partially phased out. For most taxpayers, it means that these expenses are "lost." Still, it pays to look over your records and see how much you can dig up. You may surprise yourself.

What do investment expenses include? Things like subscriptions to investment on-line services, publications or newsletters; ongoing accounting or attorney fees related to the investment; investment advice; money management fees; dividend or automatic reinvestment plan fees; clerical help; the indemnity bond premium you'd pay to replace lost or missing securities; safe deposit box rent; custody fees for sponsored investment plans; trustee fees for revocable trusts; investment expenses passed through to you from an S corporation, partnership, or REMIC; and even office rent.

Some items are not deductible, but must be added to the tax basis of the investment, to reduce your capital gains when you sell: broker's commissions, state or local transfer taxes, and any fees to set up the investment.

Some items are not deductible at all: transportation to stockholder meetings, expenses of attending investment-related seminars and conventions, and expenses related to tax-exempt investments. If you have some expenses (for example, financial advisory fees) that relate to both taxable and tax-exempt income, you have to prorate the expenses and deduct only the part pertaining to taxable expenses.

Claiming your deduction. Your investment expenses are included on Line 23 of Schedule A, Itemized Deductions. If you don't have room to list the categories of expenses you paid on the dotted lines following Line 23, you can attach additional sheets of paper to your return.

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