Best way to take investment tax write offs?

[green night]

Probably like you, i'm sick of paying taxes ... most of my free time is spent on stock investments ... CNBC, Yahoo FI, ML research, Barrons, etc. I enjoy it because and I think i'm relatively good at it.

Tons of lunches and dinners are spent with a few close friends debating investments, strategies, etc. I write a few emails walking through my strategies for friends and a couple relatives. Some take advantage of the advice and a few are waiting for me to be wrong (again) to remind me.

I have about 1.0MM in retirement accounts through mutual funds and stocks, 500K in a trading account, another 400K in deferred income that will be paid over 10 years after leaving my full time job. I make about $175K, AGI, after everything is accounted for.

My investment expenses are less than $300 per year. I have a home office that I use for my work and investments. I bought a laptop last year ... which i use at least 75% on investing.

I know I can capture the very clean investment expenses (subscriptions) and laptop. Are there more aggressive ways to capture some of the lunches / dinners/ home office, and travel for investment expenses? Note: I don't claim the home office for work, primarily b/c i spend much of my time on personal investment. Been always worried about a red flag ...

So, the question is if I have $2MM that i spend a ton of time trying to manage, how can capture more related expenses? Can one start a company to capture the related expenses? Anyone have any experience with this type of thing?

 

[Dash man]

Generally you can only deduct expense over 2% of your AGI, so I've never found it worth worrying about. You can Google investment expense deductions and you'll find a lot of information.

 

[green night]

Generally you can only deduct expense over 2% of your AGI, so I've never found it worth worrying about. You can Google investment expense deductions and you'll find a lot of information.

Yep, that's the problem ... i've done some google searching, didn't see much. Hoping someone on here with some $, figured out a good way.

 

[Dash man]

Yep, that's the problem ... i've done some google searching, didn't see much. Hoping someone on here with some $, figured out a good way.

I suspect most of the people here would be more focused on keeping the expenses low enough to not worry about the write off.

 

[jebmke]

I suspect most of the people here would be more focused on keeping the expenses low enough to not worry about the write off.

If I spend 10 minutes a week I'd be surprised. Quick check in Vanguard to make sure nobody else has been in there. Re-balance once or twice a year, if that.

 

[Animorph]

You can deduct interest on loans you used to invest. That's the only investment deduction I can take.

 

[RunningBum]

I'd look at this somewhat like an investment club, and I googled it. At http://www.douglasgerlach.com/clubs/askdoug/deductible_expenses.html it says

According to the NAIC Accounting Manual, the following expenses would be deductible:

• Postage and stationery
• Manuals or reference materials relating to an investment decision
• Costs of copying, producing, and mailing meeting notices
• Dues paid to NAIC

Expenses such as refreshments, attending company annual meetings, or attending investment seminars or conventions are not deductible. The IRS doesn't consider a club to be a "business or trade," so you can't deduct the costs of items or services which are normally classified as business-related expenses. (For more information on deductible and non-deductible investment expenses, consult the IRS's Publication 17, Your Federal Income Tax (for Individuals); Chapter 30 - Miscellaneous Deductions, Deductions Subject to the 2 percent Limit and Publication 529, Miscellaneous Deductions; Nondeductible Expenses.)

I suspect the reason you aren't finding much in google searches is because it isn't allowed. And there's that 2% thing already mentioned, so you'd have to have over $3500 in expenses to qualify.

 

[green night]

I'd look at this somewhat like an investment club, and I googled it. At http://www.douglasgerlach.com/clubs/askdoug/deductible_expenses.html it says



I suspect the reason you aren't finding much in google searches is because it isn't allowed. And there's that 2% thing already mentioned, so you'd have to have over $3500 in expenses to qualify.

Great info!! Thanks!! I suspected as much ... so, is there a better way?

What if one started a company ... such as a Investment Newsletter. Maybe it works and maybe it doesn't, but all those expense related items would be tax deductible, at least for a short period of time.

I know ... businesses rule of thumb is that you have 3 years to begin to show a profit and all that ....

I'm not much of a risk taker at the end of the day ... fun to think about though.

 

[Dash man]

You're now getting into having to file a Schedule C for a business. Totally different than investment deductions.

 

[green night]

You're now getting into having to file a Schedule C for a business. Totally different than investment deductions.

Dude, are you serious? :cool smiley:

... that's the point of my thread. Re-read the original post ... i have $300 of investment expenses. I clearly spend a lot more $ working through ideas etc. Should i start a company to capture those expenses? Does anybody have experience with that type of thing.

 

[Dash man]

Dude, are you serious? :cool smiley:



... that's the point of my thread. Re-read the original post ... i have $300 of investment expenses. I clearly spend a lot more $ working through ideas etc. Should i start a company to capture those expenses? Does anybody have experience with that type of thing.

If you want to risk the scrutiny a schedule C will bring for an "investment business"...after all, the IRS is there to help....not!

 

[target2019]

Dude, are you serious? :cool smiley:

... that's the point of my thread. Re-read the original post ... i have $300 of investment expenses. I clearly spend a lot more $ working through ideas etc. Should i start a company to capture those expenses? Does anybody have experience with that type of thing.

Starting a business to capture expenses would not be the way to go. Starting a business to make money would be the way to go.

 

[38Chevy454]

Only real way for your business to be worth significant tax write-off is to use the home office deduction. You also open up additional ability to write off business expenses, like seminar fees and training for example. Travel can work, but be able to really show it is business if audited.

Even with a business, you can't write off your investment costs, except that amount over the 2% limit. You can't pay yourself for your own investment advice and claim that as an expense.

If you have legit business, and can show some clients, then take the Schedule C and home office deductions. You can prove it, so take it. It opens up a lot of write-offs and no reason to not use them as legit business expenses.

BTW, I have a small home based business, not an investment advisor, but I take advantage of all of the tax benefits that are available. Mine is an online business, with a small amount of direct sales at a few events each year. Yes it has some paperwork hassles and record keeping time, but those are far offset by the tax savings.

 

[W2R]

I suspect most of the people here would be more focused on keeping the expenses low enough to not worry about the write off.

+1 Writing off investment expenses is right near the bottom of my "to do" list in retirement since they are negligible.

 

[pb4uski]

WADR green night, you're pushing a rope (aka on a wild goose chase). The additional IRS audit risk IMO would far exceed the value of any deductions. My suggestion is that you move on to greener pastures.

 

[green night]

+1 Writing off investment expenses is right near the bottom of my "to do" list in retirement since they are negligible.

not in retirement ... taxes is another form of expense. If I reduce them, I put more cash in my pocket.

 

[pb4uski]

not in retirement ... taxes is another form of expense. If I reduce them, I put more cash in my pocket.

But... what you don't know is early in retirement quite commonly your tax rate is very low. My effective federal income tax rate in my first year retired was 0% as my income was all qualified dividends and capital gains and I was in the 15% tax bracket. This year I changed strategies and my effective federal income tax rate is a whopping 4.7% so if I had investment expenses above the 2% of AGI for each $100 of expense above the threshold I would get $5 benefit. BFD.

I have better things to do with my time and would not be at all close to the 2% threshold.

I suggest that you listen and learn from the experience on this board but since you seem to already know the best answer so go ahead and have fun wasting your time.

...Should i start a company to capture those expenses? Does anybody have experience with that type of thing.

What is the income that this company will have? The only way to benefit is to have persistent losses and those persistent losses will attract the attention of the IRS. So if you're interested in getting audited by the IRS by all means, proceed with your cockamamie plan.