How to Deduct Investment Counselor Fees From Taxes

When you hire an investment counselor to advise you on your investment strategy or to manage your investment portfolio, the fees that you pay are deductible if they relate to taxable investment income. If you pay commission to your investment counselor for acquiring stock or other investment assets, those fees are part of the cost basis of the asset and not deductible as an itemized deduction.

Difficulty: Moderately Easy

Instructions

1. Keep an adequate record of the investment counselor fees and expenses incurred during the tax year. The record should show the date, fees, investment advisor's name and the purpose of the advice.

2. Separate deductible investment counselor fees from commissions and fees paid to acquire investment assets. These acquisition costs can be used to reduce gain or increase losses when the assets are sold.

3. Add legal expenses to the investment expense deductions if they were incurred in an attempt to produce taxable income or to collect income.

4. Subtract investment income counselor fees that are in connection with earning nontaxable income.

5. Calculate the deduction limitation factors which includes a 2 percent of adjusted gross income (AGI) limit for certain miscellaneous deductions and an overall itemized deduction limitation. These limitations change every year and may be applicable if your AGI is high.

Tips & Warnings

• Fees paid that are applicable to nontaxable income, such as interest received on municipal bonds, are not be deductible.