Q: Which investment costs can I deduct on my tax return?
The Tax Cuts and Jobs Act has done away with most investment expense deductions. Taxpayers were formerly able to deduct investment expenses such as investment advice fees, IRA custodial fees, and certain other costs, as part of the “miscellaneous itemized deductions” category. This entire group of deductible items has been eliminated.
However, there are a couple of big investment expenses that are still deductible: interest expenses and capital losses.
For interest expenses, if you purchased any taxable investments with borrowed money, such as a margin loan, you can deduct the cost of any interest you paid as a result. This deduction is capped at the amount of your net investment income. In other words, if you have $1,000 in investment income, that’s the maximum amount of investment interest you can deduct. Excess interest can be carried over to future years.
A capital loss is when you sell an investment for less than you paid. Capital losses can be used to offset capital gains and can also be used to reduce your other income by as much as $3,000. Net losses of more than $3,000 can be carried over.
So while several deductible investment expenses have been eliminated, you may still be able to write off a few of your investment costs in 2019 and beyond.