Are Financial Advisor Fees Tax Deductible?

As an investor, it’s wise to take advantage of every available deduction to save on your taxes. Because tax laws are ever-changing, what may be deductible one year may not be deductible the next. Understand current tax law and upcoming changes to gain insight into whether certain fees, including financial advisor fees, are tax deductible for investors. 

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  • Written By
    Ebony J. Howard, CPA

    Ebony J. Howard, CPA

    Credentialed Tax Expert

    Ebony J. Howard is a certified public accountant and freelance consultant based in Atlanta, Georgia. Ebony has a deep knowledge of the financial landscape and a background in accounting, personal finance and income tax planning and preparation.

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    Savannah Pittle is an accomplished writer, editor and content marketer. She joined Annuity.org as a financial editor in 2021 and uses her passion for educating readers on complex topics to guide visitors toward the path of financial literacy.

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    Marguerita M. Cheng, CFP®, CRPC®, CSRIC®, RICP®

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  • Updated: August 11, 2023
  • 4 min read time
  • This page features 7 Cited Research Articles
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APA Howard, E. J. (2023, August 11). Are Financial Advisor Fees Tax Deductible? Annuity.org. Retrieved June 15, 2024, from https://dev.annuity.org/financial-advisors/are-financial-advisor-fees-tax-deductible/

MLA Howard, Ebony J. "Are Financial Advisor Fees Tax Deductible?" Annuity.org, 11 Aug 2023, https://dev.annuity.org/financial-advisors/are-financial-advisor-fees-tax-deductible/.

Chicago Howard, Ebony J. "Are Financial Advisor Fees Tax Deductible?" Annuity.org. Last modified August 11, 2023. https://dev.annuity.org/financial-advisors/are-financial-advisor-fees-tax-deductible/.

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Key Takeaways

  • The Tax Cuts and Jobs Act (TCJA) of 2017 eliminated the deductibility of financial advisor fees for tax years 2018 through 2025.
  • The IRS allows you to deduct up to $3,000 (or $1,500 if married filing separately) in capital losses from your ordinary income each year.
  • Investment interest expense is deductible only to the extent of your net investment income. Any excess that was disallowed in the prior year can be carried forward to future years.

The passing of the Tax Cuts and Jobs Act (TCJA) of 2017 under the Trump Tax Reform Plan led to several significant changes for individuals and businesses regarding deductions, tax credits, tax rates and policies.

Notably, the Act eliminated financial advisor fees as a deduction. As of January 2018, these fees are no longer tax deductible. The TCJA tax cuts are temporary: Most changes are set to expire in 2025, and there is a possibility for eligibility for the deduction again in the future. So, investors may choose to focus on maximizing other deductions until that time.

Can You Deduct Financial Advisor Fees From Your Taxes?

The TCJA eliminated the deductibility of financial advisor fees for tax years 2018 through 2025. 

Prior to the Act, financial advisor fees were deductible as miscellaneous itemized deductions on Schedule A of the tax return if they exceeded 2% of adjusted gross income (AGI) in 2017 and prior tax years.

For example, if you paid fees to your financial advisor and your AGI was $150,000 in 2017, you could deduct those fees that exceeded $3,000 — or 2% of AGI — as a miscellaneous itemized deduction on your tax return. In this case, if you paid $4,000 in financial advisor fees over the course of the year, $1,000 of this amount would be tax deductible.

What Changed After the Tax Cuts and Jobs Act of 2017?

Tax reform brought many changes after the TCJA and eliminated most miscellaneous itemized deductions, including investment-related expenses.

Investors can no longer deduct any costs associated with producing investment income, including:

  • Financial advisor fees.
  • Rental fees for a safe deposit box.
  • Fees paid to brokers or trustees to manage IRAs and other investment accounts.
  • Fees paid for legal counsel and tax advice.
  • Investment publication subscription costs.
  • Accounting fees.

This change could be temporary for those who seek investment expense write-offs as a tax benefit. Upon expiration of the TCJA, these changes may revert back to allow deductibility, or they may be renewed.

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Are There Other Fees You Can Deduct as an Investor?

While current tax legislation eliminates several previously deductible investment expenses, there are other strategies investors can use to save on taxes.

Investment Interest Expense

When you borrow money to purchase assets, such as margin interest when purchasing securities, you can deduct the interest you paid on the borrowed money as an investment interest expense deduction. 

However, there are limitations. Your investment interest expense is deductible only to the extent of your net investment income. Any excess that was disallowed in the prior year can be carried forward to future years until your net investment income is recognized. 

Imagine that you took out a $3,000 loan with an interest rate of 5% to purchase an investment that didn’t perform well and only generated a 4% return. In this case, you paid $150 in investment interest expense and the investment income was $120. You are limited to deducting $120 as investment interest.

The excess $30 investment interest expense can be carried forward to the next year. To claim the investment interest expense deduction, you must itemize your deductions on Schedule A and use Form 4952 to determine the investment interest expense deduction.

Capital Losses

Market unpredictability is inevitable when investing. There will be ups and downs, but if you find your investments falling on the latter end, you can use your capital losses to your advantage. 

The IRS allows you to deduct up to $3,000 (or $1,500 if married filing separately) in capital losses from your ordinary income each year. Any excess over that amount carries forward into the following years against ordinary income until it is gone, or as a capital loss carryforward deduction to offset capital gains in future years.

IRA Custodial Fees

If you have a traditional IRA, you have the option to pay the IRA custodial fees out of the IRA’s balance. 

Let’s say you are under 50 and contribute the maximum of $6,500 in 2023. The trustee deducts $250 for custodial fees. This counts as a tax benefit since you are paying the IRA custodial fees with pre-tax dollars, and the fee is not considered part of your total IRA contribution for the year. In addition, the IRS won’t consider this payment as a distribution from the IRA. 

While this is not a tax deduction, it is a tax-advantaged way to pay your IRA’s management fees.

Please seek the advice of a qualified professional before making financial decisions.
Last Modified: August 11, 2023

7 Cited Research Articles

Annuity.org writers adhere to strict sourcing guidelines and use only credible sources of information, including authoritative financial publications, academic organizations, peer-reviewed journals, highly regarded nonprofit organizations, government reports, court records and interviews with qualified experts. You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines.

  1. FINRA. (2022, December 19). Individual Retirement Accounts. Retrieved from https://www.finra.org/investors/learn-to-invest/types-investments/retirement/individual-retirement-accounts
  2. Fidelity Investments. (2021, January 1). Fidelity Advisor IRA Statement of Fees. Retrieved from https://institutional.fidelity.com/app/literature/form/703910/fa-ira-statement-of-fees.html
  3. Internal Revenue Service. (2019, March 21). Tax reform brought significant changes to itemized deductions. Retrieved from https://www.irs.gov/newsroom/tax-reform-brought-significant-changes-to-itemized-deductions
  4. Internal Revenue Service. (2019). Topic No. 409 Capital Gains and Losses. Retrieved from https://www.irs.gov/taxtopics/tc409
  5. Internal Revenue Service. (2017). 2017 Publication 529. Pages 10-11. Retrieved from https://www.irs.gov/pub/irs-prior/p529--2017.pdf
  6. Congress.gov. (n.d.). 115th Congress Public Law 97. Page 2088. Retrieved from https://www.congress.gov/115/plaws/publ97/PLAW-115publ97.htm
  7. Internal Revenue Service. (n.d.). Investment Interest Expense Deduction. Retrieved from https://www.irs.gov/pub/irs-access/f4952_accessible.pdf