For most individual investors, investment fees are not tax deductible on a federal return. The Tax Cuts and Jobs Act suspended the deduction for investment advisory fees, custodial charges, financial planning costs, and similar expenses starting in 2018, and the One Big Beautiful Bill Act made that suspension permanent in 2025.1Office of the Law Revision Counsel. 26 U.S. Code 67 – Two-Percent Floor for Certain Miscellaneous Itemized Deductions A few specific costs still produce tax benefits, though: margin interest, brokerage commissions built into your cost basis, and foreign taxes withheld on international dividends.
What You Can No Longer Deduct
Before 2018, individual taxpayers could deduct investment expenses that exceeded two percent of adjusted gross income. That deduction is gone, and under current law it is not coming back. The suspended category covers essentially every recurring cost an ordinary investor pays:
- Fees paid to financial advisors, wealth managers, and robo-advisors, including percentage-of-assets charges
- Custodial fees charged by brokerages or banks for holding your accounts
- Financial planning fees for retirement, estate, or investment tax strategy
- Safe deposit box rental used to store investment documents
- Subscriptions to financial news, research tools, or market data
None of these can offset your income on a federal return, no matter how large.2Internal Revenue Service. Publication 529, Miscellaneous Deductions Someone paying a one-percent management fee on a million-dollar portfolio absorbs that $10,000 cost entirely; it cannot reduce salary, capital gains, or any other income.
Fees on IRAs and 401(k)s
Administrative and management fees for retirement accounts follow the same rule. If you pay them out of pocket with a personal check, you get no deduction.2Internal Revenue Service. Publication 529, Miscellaneous Deductions
Fees paid directly from the account balance work differently. When your IRA custodian pulls the fee out of the account itself, that payment is not treated as a taxable distribution, and no early withdrawal penalty applies.3Internal Revenue Service. Retirement Topics – Fees The trade-off is that the money coming out of the account is money that would otherwise keep growing tax-deferred (or tax-free in a Roth). Whether to pay inside or outside the account is a judgment call based on your marginal tax rate and how much you value preserving the invested balance.
Margin Interest Is Still Deductible
Interest on money you borrow to buy taxable investments — margin interest is the common example — is still deductible as an itemized deduction. Federal law caps the deduction at your net investment income for the year, and any excess carries forward to future years.4Office of the Law Revision Counsel. 26 USC 163 – Interest
Net investment income generally means interest, ordinary (nonqualified) dividends, short-term capital gains, and royalties. It does not include qualified dividends or long-term capital gains unless you make a special election to bring them in. That election increases the interest you can deduct now, but the included gains lose their preferential rate and get taxed as ordinary income.5Internal Revenue Service. Form 4952 – Investment Interest Expense Deduction
A practical example: you earn $5,000 in taxable interest and pay $7,000 in margin interest. You deduct $5,000 this year and carry the remaining $2,000 forward. You claim the deduction on Form 4952 in most cases. You can skip the form only if your investment income from interest and ordinary dividends (minus qualified dividends) exceeds your investment interest expense, you have no other deductible investment expenses, and no carryover from a prior year.5Internal Revenue Service. Form 4952 – Investment Interest Expense Deduction
One boundary worth flagging: interest on money borrowed to buy tax-exempt investments, such as municipal bonds, is never deductible. Federal law disallows an interest deduction on debt used to hold securities whose income is already tax-free.6Office of the Law Revision Counsel. 26 U.S. Code 265 – Expenses and Interest Relating to Tax-Exempt Income
Brokerage Commissions Reduce Your Taxable Gain
Commissions and transaction fees on trades are handled through cost basis rather than as a line-item deduction. When you buy shares, the commission is added to your purchase price. When you sell, selling costs are subtracted from your proceeds. The net effect is a smaller taxable gain.
Say you buy $10,000 of stock and pay a $50 commission. Your basis is $10,050. You later sell for $15,000 with a $50 selling fee, leaving net proceeds of $14,950. Your taxable gain is $4,900, not $5,000.7Internal Revenue Service. Publication 550, Investment Income and Expenses You do not “deduct” the commissions, but they still reduce your tax bill at the time of sale.
Mutual fund expense ratios work in a related way. For publicly offered funds, which cover most retail investors, the dividends reported to you on Form 1099-DIV have already been reduced by your share of the fund’s internal expenses. You do not separately deduct those fees, but you also do not pay tax on the money the fund spent on them.7Internal Revenue Service. Publication 550, Investment Income and Expenses
Foreign Taxes on Dividends and Interest
If you own foreign stocks or international funds, a foreign government often withholds tax on the dividends. You can recover that cost on your U.S. return in one of two ways: as a dollar-for-dollar tax credit, or as an itemized deduction. You cannot claim both in the same year.8Internal Revenue Service. Foreign Tax Credit – Choosing to Take Credit or Deduction
The credit is usually the better option. It reduces the tax you owe directly, not just your taxable income, and you can take it while still claiming the standard deduction. Excess credit can carry forward or back to other years. You generally file Form 1116 to claim it, but if your total foreign taxes are $300 or less for the year ($600 or less filing jointly), you can claim the credit on your return without the form.9Internal Revenue Service. 2025 Instructions for Form 1116 – Foreign Tax Credit
A Different Path for Professional Traders
If you qualify as a trader in securities — a status very few people meet — you deduct trading costs as business expenses on Schedule C rather than as personal itemized deductions. Business expenses were never part of the suspended category, so advisory fees, subscriptions, and other trading costs remain fully deductible for someone who clears the bar.10Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses
The IRS applies a strict test based on your actual conduct, not your self-description. You must be trying to profit from daily price swings rather than from dividends or long-term appreciation. Your trading must be substantial, frequent, and continuous. Short holding periods and a serious time commitment support the classification; occasional trading and long holds do not.11Internal Revenue Service. Topic No. 429, Traders in Securities Calling yourself a day trader carries no weight if the underlying activity does not look like a business.
Check Your State’s Rules
The federal suspension is permanent, but state income tax rules vary. Some states conform to current federal law and disallow the deduction. Others still follow pre-2018 rules or have their own provisions for investment expenses. If you live in a state with an income tax and pay a meaningful advisory fee, it is worth checking whether your state permits a deduction the federal return does not.