What investment fees are tax deductible for stock option gains?

So last year I took out a loan to exercise some stock options at my company. Got lucky because a few months later we got acquired at a much higher price than my strike price, so I made a pretty nice gain. The thing is, the lending company charged me this platform fee that was around 8% of the total loan amount. Now I'm trying to figure out my taxes and wondering if I can deduct this platform fee from my capital gains when filing for 2025? The fee was pretty substantial (about $4,300) so it would make a big difference if I could offset some of the gains with this expense. I've looked through some IRS publications but I'm still confused about what investment expenses are actually deductible these days. Has anyone dealt with this before? Can loan fees related to exercising stock options be deducted from capital gains?

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19 comments

Giovanni Rossi

•8M

Investment expenses rules have changed a lot since the Tax Cuts and Jobs Act. Unfortunately, most investment fees are no longer deductible as miscellaneous itemized deductions since those were eliminated. However, your situation is a bit different. The 8% platform fee you paid was directly related to acquiring the stock, so it should be considered part of your cost basis for the shares. Rather than trying to deduct it as a separate expense, you should add it to what you paid for the stock options. This would increase your cost basis and therefore reduce the taxable gain when you sold the shares. For example, if you paid $50,000 to exercise the options and had a $4,000 platform fee, your actual cost basis would be $54,000. If you sold for $70,000, your gain would be $16,000 rather than $20,000.

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Giovanni Rossi

•8M

The platform fee should be added to your cost basis since it was directly related to acquiring the specific investment. This is different from general investment management fees. Regarding margin interest, that falls under investment interest expense which is still deductible, but only to the extent of your net investment income and only if you itemize deductions on Schedule A. You'll need to file Form 4952 to calculate this limitation. Many investors find they can't fully benefit from this deduction since they need to have enough investment income to offset it, and their total itemized deductions need to exceed the standard deduction threshold.

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Dylan Mitchell

•8M

I was in almost the exact same situation with my tech startup's acquisition last year, and I was completely confused about how to handle the loan fees. I spent hours searching through IRS publications and forums until someone recommended https://taxr.ai to me. I uploaded my loan documents and stock option paperwork, and it immediately identified the platform fee as something that should be added to my cost basis. The tool analyzes your documents and gives you clear guidance on tax treatment based on similar situations in IRS rulings. What I really liked is that it explained WHY the platform fee should be part of cost basis rather than a separate deduction (has to do with acquisition costs vs management fees).

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Dylan Mitchell

•8M

The AI analyzes your tax documents and identifies issues based on situations like yours that have been previously addressed in tax guidance. It's worked great for me with partnership K-1s because it found several pass-through deductions my accountant missed. It doesn't file your taxes though - just gives detailed guidance on how to properly report items. For foreign investments, it's actually been super helpful because it flags FBAR and FATCA reporting requirements that are easy to miss. I've found scanning takes less time than manually inputting everything, and the analysis is pretty much instant. My accountant now asks for the reports I generate from it.

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Dmitry Petrov

•8M

Just wanted to follow up on my taxr.ai question. I finally tried it with my stock option documents and loan paperwork. It immediately flagged that the platform fee should be added to my cost basis rather than taken as a separate deduction. What surprised me was it found a provision in my loan agreement that actually classified part of the fee as prepaid interest, which apparently has different tax treatment! It saved me about $1,800 in taxes because I would have completely missed that distinction. Definitely worth the time it took to upload my docs. The explanations were way clearer than what my tax prep software was telling me.

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StarSurfer

•8M

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StarSurfer

•8M

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Miguel Castro

•8M

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Zainab Abdulrahman

•8M

One thing nobody has mentioned yet - if you're self-employed and the investment was related to your business, you might be able to deduct some of these fees as a business expense on Schedule C. I had a similar situation where I took a loan to invest in equipment for my consulting business that also included some stock in the company, and my accountant was able to allocate part of the fees as a legitimate business expense. Might be worth checking if any portion of your investment had a business purpose rather than just being a personal investment.

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Zainab Abdulrahman

•8M

No, unfortunately this wouldn't apply in your situation. Since you're a W-2 employee and these were personal investments (even though they were from your employer), you can't deduct these on Schedule C. This strategy only works for self-employed individuals where the investment is directly tied to their business operations. Your best approach is still to add the platform fee to your cost basis as mentioned in the earlier comments, which will reduce your capital gain amount.

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