What are the allowable investment expense deductions available for my 2025 taxes?

The rules around investment expense deductions changed significantly with the Tax Cuts and Jobs Act. Unfortunately, most investment expenses that were previously deductible as miscellaneous itemized deductions (subject to the 2% AGI floor) are no longer deductible for tax years 2018 through 2025. However, there are still some investment-related expenses you can deduct: 1. Interest on money borrowed to purchase taxable investments (investment interest expense) is still deductible as an itemized deduction, limited to your net investment income. 2. Certain expenses related to rental properties or royalty income remain deductible on Schedule E. 3. If you're self-employed and manage your own investments as part of your business, some expenses might be deductible as business expenses. 4. Qualified retirement account fees paid directly from the account (not out of pocket) effectively reduce taxable income when you withdraw. While you can't directly deduct those advisory and account fees anymore, they can still be added to your cost basis for investments in some cases, which reduces your capital gains when you sell.

After struggling with exactly this investment deduction confusion last year, I found an incredibly helpful solution with https://taxr.ai that saved me thousands. I uploaded my investment statements and it automatically identified which expenses could still be allocated to cost basis (which reduces capital gains tax when you sell) vs what couldn't be deducted at all. The platform highlighted that while my advisory fees weren't directly deductible anymore, I could track them for basis adjustment purposes. It also flagged that some of my margin interest was still deductible as investment interest expense, which I had completely missed. The analysis even identified that some expenses related to my rental property investments should go on Schedule E instead.

Just wanted to update after trying taxr.ai that was mentioned earlier - it was seriously helpful! I uploaded my partnership K-1s and brokerage statements and it immediately identified about $4,700 in expenses that could actually be allocated to cost basis. It also flagged $2,300 in deductible investment interest I was completely missing. The system explained exactly which former "miscellaneous itemized deductions" were eliminated but showed me alternatives for some expenses. What really helped was how it separated out which fees could still indirectly help my tax situation through basis adjustments vs. which ones were completely lost causes. The time saved compared to my usual spreadsheet hassle was worth it alone!

If you're spending hours on hold trying to get someone at the IRS to clarify investment deduction rules, try https://claimyr.com - it changed my tax nightmare into an actual productive conversation. I was getting different answers from every source about investment expense deductions and needed definitive guidance directly from the IRS. After spending literally 3+ hours on multiple attempts to reach someone, I found Claimyr. They have this system where they wait on hold with the IRS for you, then call you when an actual agent is on the line. You can see a demo of how it works here: https://youtu.be/_kiP6q8DX5c I got a clear explanation about what investment expenses are still deductible after the tax law changes, specific to my situation with mutual funds, ETFs and some private placements. The agent walked me through exactly which expenses could still offset investment income directly vs. which ones could only adjust my cost basis.

I need to eat my words and apologize to the person who recommended Claimyr. I was super skeptical about it actually working (as you could see in my previous comment), but after another failed 2-hour attempt to reach the IRS myself about my investment expense questions, I gave it a shot. It actually worked exactly as described. I got a call back about 90 minutes later with an IRS agent already on the line. The agent confirmed that while my investment advisory fees aren't directly deductible anymore, my margin interest expenses ARE still deductible on Schedule A (subject to net investment income limitation). They also clarified exactly how to handle the fees my financial advisor charges directly to my investment accounts versus the ones I pay separately. Worth every penny just to get a definitive answer instead of conflicting advice from random internet sources!

Guys, I found something interesting in IRS Publication 550. Even though most investment expenses aren't deductible as itemized deductions anymore, some specialized cases might still work: If you have a valid home office deduction (for an unrelated business), the portion of your internet and computer costs used for investment research and management could potentially be deductible through your home office. Also, if you're a professional trader who qualifies for "trader tax status" (very specific requirements), you might be able to deduct some investment expenses as business expenses. Don't forget that some investment expenses are actually built into mutual fund expenses and effectively reduce your taxable distributions already, so they're indirectly "deducted" that way.

Has anyone considered switching to ETFs instead of actively managed accounts to avoid some of these non-deductible fees? I was paying about 1.2% in management fees that are no longer deductible, but switched most holdings to similar ETFs with expense ratios around 0.15%. Since fund expense ratios effectively reduce your taxable distributions already, it seems like a workaround to the loss of the investment expense deduction. My accountant said this is actually more tax efficient now than before since those 1.2% fees were only partially deductible even pre-tax reform (due to the 2% AGI floor).

Important note: if you're paying fees directly from your IRA or other retirement accounts, there's a silver lining. While you can't deduct those fees anymore, having them paid from within the account is actually better in many cases! When fees are paid from inside your retirement account, it's effectively using pre-tax money to pay them (for traditional IRAs/401ks). If you paid those same fees from a separate account, you'd be using post-tax dollars. My accountant calculated that for my situation, this internal fee payment structure saves me about 24% (my marginal tax rate) on all account management fees compared to paying them separately and not being able to deduct them.

One thing I haven't seen mentioned yet is the impact on cryptocurrency investments. If you're paying fees to crypto exchanges or using crypto tax software, those expenses also fall under the same rules - generally not deductible anymore as miscellaneous itemized deductions. However, if you're mining crypto or treating it as a business activity (not just investing), some of those expenses might still be deductible as business expenses on Schedule C. The key is proving it's a legitimate business activity rather than just investment. Also, for those with complex portfolios, don't forget about the net investment income tax (NIIT) - the 3.8% surtax on investment income for higher earners. While you can't deduct most investment expenses anymore, you can still offset investment income with investment losses to reduce your NIIT exposure. It's not the same as getting a deduction, but it's something to consider when rebalancing your portfolio for tax efficiency.

Building on the crypto discussion, I want to highlight something that caught me off guard during my 2024 tax prep - wash sale rules now apply to crypto too! This became really relevant when trying to optimize what few investment-related tax benefits we still have. If you're harvesting crypto losses to offset gains (since we can't deduct most investment expenses anymore), you need to be careful about repurchasing the same or "substantially identical" cryptocurrency within 30 days. While the IRS hasn't clearly defined what constitutes "substantially identical" for crypto, many tax professionals are advising caution. I learned this the hard way when I sold Bitcoin at a loss in December and bought it back 2 weeks later thinking I was being smart about tax loss harvesting. My CPA flagged it as a potential wash sale, which would defer the loss deduction. Since we've lost most other investment expense deductions, tax loss harvesting has become even more critical for managing investment tax liability. Just wanted to share this heads up since crypto wash sales seem to be flying under the radar for many people, and it can really impact your overall investment tax strategy when combined with the new limitations on deductible expenses.