Are Wealth Management Fees Tax Deductible?

If you’ve hired a wealth manager in the past, you may be wondering if their fees are tax deductible. Let’s take a look at what, if any, fees are tax deductible and what you need to do to fill out your tax forms correctly.

Have the rules changed for investment advisory tax deductions?

Through 2017, investment management and financial planning fees were tax deductible. Essentially, these deductions fell into “miscellaneous itemized deductions,” which were taken away from the tax code starting in 2018. This current tax code is in effect until 2025, which Congress can then either let expire or renew.

What are the new rules for claiming a deduction?

Because you can no longer deduct any financial advisor fees, you may want to look into other tax breaks that may apply to you as an investor. Instances include:

Investing in a 401(k)

If you invest in a 401(k), your deductions are automatically entered and subtracted from your taxable income when you file your taxes.

Health Savings Accounts (HSAs)

HSAs work the same way as your 401(k). These deductions are automatically entered and subtracted from your total taxable income.

Traditional IRA

Traditional IRA deductions are a little trickier than 401(k)s and HSAs. This is because you can only deduct based on income, filing status, and if you're covered by a work retirement plan. Generally, if you are single and make $65,000 AGI or less, or you are married filing jointly with an AGI of $104,000 or less, you are able to deduct your full IRA contribution.

How can I minimize my tax liability?

Even though you can no longer deduct your wealth management fees from your taxes, you can still minimize your tax liability as an investor. However, there is so much information out there and it changes based on individual situations that it’s best to speak with a fiduciary financial advisor to figure it out for you. Not only will they be familiar with all things taxes, but they may even help you find more deductions that you may have missed if doing it on your own.

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