Can I Deduct Online Stock Trade Fees ?
Generally speaking, the IRS wants to tax you on your net income, after expenses -- not your gross. Therefore, the IRS allows you to deduct any expenses associated with income-producing assets, including investments, before you report your modified adjusted gross income. You can typically deduct any reasonable expenses associated with investing, including brokerage fees.
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Deducting Brokerage Fees
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You should get a detailed breakout of all your brokerage fees, including flat fees, statement fees and commissions, in your end-of-year statement from your broker. If you are not a full-time investor, you can generally deduct brokerage fees and commissions on your personal income tax return.
Cost of Advice
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If you paid a financial adviser, you can also deduct the fees paid, commissions or other compensation. You can also deduct the cost of any courses taken or newsletter or magazine subscriptions, provided these subscriptions are generally related to your investing.
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Professional Traders
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If you make most of your living from trading securities, your tax situation changes significantly. The IRS considers you to be running a business, in that event - particularly if you focus on short- term stock market movements and spend much of your time engaging in trading activities.
How to Report Investment Expenses
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You must itemize your deductions in order to claim investment expenses against your income. To claim these expenses, fill out Form 1040 and a Schedule A, Miscellaneous Itemized Deductions. List all your investment expenses, other than interest expense, on Line 23. If necessary, complete IRS Form 4942 -- Investment Interest Expense Deduction, along with your other documents. If you are a professional trader, you do not use Schedule A. Instead, you report your expenses as a business expense on Schedule C.
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