The following tax issue is tricky; seek professional tax help if you intend to use this provision. There are no tax specialists at MOAA. We are about awareness, not advice.
“You can deduct investment fees, custodial fees, trust administration fees, and other expenses you paid for managing your investments that produce taxable income,” according to IRS Publication 17, “Your Federal Income Tax.”
Managing investments that produce taxable income?
Generally (because when in taxes is anything certain?), the “managed income” must add to your adjusted gross income (AGI) before you can deduct expenses.
You have to pay out of your pocket the people who produce the income. Expenses deducted from within an account might not qualify, as these expenses usually reduce available taxable income. If you employ a private money manager who bills you directly, you might have a deduction.
The expense fee within funds doesn’t qualify. The expense fees in funds reduce your rate of return, thereby denying you potential taxable income by not adding to your income.
You cannot deduct a fee you pay to a broker to buy or sell income assets if the fee becomes a part of the cost-basis of the asset.
You cannot include personal expenses. Fees charged for personal financial planning services are not deductible. The act of financial planning and advisor services does not produce income.
Note on Schedule A that investment costs are part of other miscellaneous deductions that must be above 2 percent of AGI.