“You can deduct investment fees, custodial fees, trust administration fees, and other expenses you paid for managing your investments that produce taxable income.”, IRS Publication 17, “Your Federal Income Tax”. “…managing investments that produce taxable income.”?

This issue is tricky and you need professional tax help if you intend to use this provision. There are no tax specialists at MOAA. We are about awareness, not advice.

Generally (because when in taxes is anything certain?)…

The managed income must add to your Adjusted Gross Income (AGI) before expenses are deductible.

You have to pay the people who produce the income out of your pocket. Expenses deducted from within an account may not qualify as these expenses usually reduce available taxable income. If you employ a private money manager who bills you directly, you may have a deduction.

The expense fee within funds doesn’t qualify. The expense fees in funds reduce your rate of return. Thereby denying you potential taxable income; not adding to your income.

You cannot deduct a fee you pay to a broker to buy or sell income assets if the fee becomes a part of the cost-basis of the asset.

You cannot include personal expenses. Fees charged for personal financial planning services are not deductible. The act of financial planning and adviser services does not produce income.

Note on Schedule A that investment costs are part of other miscellaneous deductions that must be above 2% of AGI.

See IRS Publication 550 for details on this topic.