Tax Facts

Can I Deduct IRA Investment Fees?

Check your IRA statement for investment or custodian fees. If you are being charged investment fees in such an account you may be wondering if you can deduct those fees on your tax return. The answer is "it depends." There are some fees that are deductible, but only if they were paid with non-IRA funds. That means you must tell your IRA custodian that you want to write a separate check to pay for those fees. By doing so, your payment is considered a tax deductible investment fee and not considered a contribution to the IRA.

What are those fees? If you are charged an annual fee, this may qualify for the deduction (usually an annual fee to manage the IRA). However, if your custodian charges you a fee according to a percentage of assets under management (AUM) - this fee would be considered part of the IRA contribution you made and is not deductible (because it is already coming from a tax-free contribution).

The key is the fee has to be considered an administrative fee. Talk to your custodian about the difference; ask if you have an annual administrative fee that you pay - and then ask if you can cut a check separately for that fee. Then it is considered an investment fee and taken as a miscellaneous itemized deduction on your Schedule A, and it is subject to a 2% of AGI floor. Talk to your Enrolled Agent tax preparer for more information on how and whether your fees are deductible.

 

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