Watch Your Investment Deductions

By Julian Block 1994, Tribune Media Services Inc. | St Louis Post-Dispatch (MO), December 26, 1994 | Go to article overview

Watch Your Investment Deductions


Julian Block 1994, Tribune Media Services Inc., St Louis Post-Dispatch (MO)


The IRS imposes several restrictions on deductions for such investment-related expenses as subscriptions to publications that track the ups and downs of the stock market, rental costs of safe deposit boxes holding securities, and fees charged by financial planners and other advisers.

For starters, those outlays are allowable only if you itemize deductions on Schedule A of Form 1040 and opt not to use the standard deduction, the no-proof-required amount that is automatically available without having to itemize. The next barrier is that investment expenses come under the rules for miscellaneous expenses, a category that includes return-preparation fees.

Most miscellaneous expenses are allowable only to the extent that they, in the aggregate, exceed 2 percent of your AGI, short for adjusted gross income. No deduction whatever for anything below the 2 percent of AGI floor. With an AGI of, say, $100,000, you forfeit any deduction for the first $2,000 of expenditures.

(AGI is the amount you list on the last line of the front of Form 1040 after all reportable income is offset by certain deductions, such as payments of alimony and funds placed in an IRA. The AGI figure is before itemizing and claiming dependency exemptions.)

Tip: Your goal should be to speed up or postpone payments into a year when you anticipate that they can surpass the 2 percent floor, something that most investors are unable to do. If you are close to, or already surpass, the 2 percent hurdle, it makes sense to maneuver into 1994 what would otherwise be 1995 payments.

Caution: You cannot increase 1994 deductions by such tactics as purchases or renewals of multiple-year subscriptions to publications. Generally, the cap on your allowable 1994 write-off is the subscription cost applicable to 1995.

Office-at-home deduction: You are unable to claim that kind of write-off when you use part of your residence to, say, read financial publications and clip bond coupons.

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