For many investors, trimming down tax bills is a top priority. Here, we’ll dive into the elusive tax write-off for financial advisor fees you might’ve come across, along with some alternative tax-savvy tactics.

Are Financial Advisor Fees Still Tax-Deductible?

Not quite—not anymore, at least.

The 2017 Tax Cuts and Jobs Act (TCJA) slammed the door shut on claiming financial advisor fees as a tax deduction. Previously, investors with hefty advisory expenses could deduct these by listing them as miscellaneous itemized deductions on Schedule A of their tax returns, subject to a threshold tied to adjusted gross income (AGI). However, those days are behind us.

Along with this, the TCJA axed a number of other investor-friendly write-offs, including costs related to:

• Accounting services
• Brokerage or trustee fees for managing investment accounts
• Legal and tax advisory expenses
• Subscriptions to investment newsletters or publications
• Safe deposit box rental charges

That said, all might not be lost forever for financial advisor fee deductions. Current legislation surrounding TCJA provisions is scheduled to sunset in 2025, which could potentially pave the way for a revival of pre-2018 tax breaks. Until that possibility unfolds, however, investors need to scout out other avenues to keep tax obligations in check.

Quick Tax Fact

According to IRS data, miscellaneous itemized deductions, including financial advisor fees, were subject to a 2% AGI floor prior to 2018, meaning only expenses exceeding 2% of your AGI could be deducted. The elimination of these deductions has impacted millions of taxpayers nationwide.

Three Alternative Approaches to Soften Your Investment Tax Burden

While shaving off taxes via financial advisor fees isn’t on the menu right now, clever investors still have a handful of techniques to ease their tax bite.

Though these might not be outright deductions, employing such strategies can substantially trim your taxable income. Here’s the lowdown.

1. Capital Loss Harvesting

One smart move is leveraging capital losses to counterbalance gains. Though nobody enjoys selling assets at a loss, strategically realizing those losses in taxable brokerage accounts can be a blessing come tax season.

When an asset is sold for less than its original cost, a capital loss is realized. This loss can mop up any capital gains you’ve racked up, shrinking your taxable amount. For instance, imagine pocketing $2,000 in gains but also booking $1,000 in losses: your net taxable gain shrinks to just $1,000, lowering your tax bill accordingly.

What if losses outstrip gains by a wide margin, or you had no gains at all? The IRS allows up to $3,000 of those excess capital losses to be deducted against ordinary income annually. Any remainder beyond that threshold doesn’t vanish—it rolls forward, ready to offset gains in future tax years.

2. Tapping Traditional IRA Contributions

Contributions to a traditional IRA can trim your taxable income, as they’re often tax-deductible the year you make them. Put simply, if you pour $5,000 into a traditional IRA, that amount might come straight off your taxable income, softening your tax load.

Moreover, while the money grows tax-deferred inside these accounts, the compound growth won’t help with deductions today but can supercharge your nest egg come retirement.

3. Riding the Wave of Lower Long-Term Capital Gains Rates

Holding onto investments in a taxable brokerage account for over 12 months before selling sets you up for a lighter capital gains rate.

These long-term gains are taxed at preferential rates of 0%, 15%, or 20%, depending on your income bracket. In 2024, for example, if your taxable income is $47,025 or less (single filers) or $94,050 or less (married filing jointly), you pay zero capital gains tax on qualifying sales. Strategically timing your sales to coincide with lower-income years can save you a tidy sum.

Wrapping It Up: Navigating Tax Deductions in a Post-TCJA World

Even though you can’t currently claim financial advisor fees on your tax return, plenty of tools remain at your disposal to optimize your investment-related tax situation. The tax landscape evolves, making it essential to stay sharp and consult a tax pro or financial planner—ensuring you’re squeezing every legitimate advantage out of the system.