Can I Deduct My Annual Retirement Fee?

by Lisa Bigelow

The Internal Revenue Service grants taxpayers the right to deduct several expenses associated with their investments. Periodicals, interest expense, and certain account fees are all deductible when taken properly. When it comes to your retirement account, however, the rules change somewhat. Depending upon how you pay your retirement account fees, it might or might not be deductible.

Retirement Account Fees

Retirement account custodians typically charge investors a fee for account management services. Fees automatically deducted from your account aren't deductible, so avoiding this pitfall is essential if you want to deduct these expenses. Pay your retirement investment fees by writing a check to your account custodian instead of having the payments removed. This way, what you pay in fees is deductible, subject to IRS limitations. In 2011, the IRS lets investors deduct up to 2 percent of adjusted gross income (AGI) for investment expenses.

Subscription Expenses

There are a variety of other deductions for those who keep accurate records. Subscription fees for investment magazines and newspapers are deductible. These expenses are also subject to the 2 percent of AGI rule. Make sure that you keep the amount that you paid and the date that you paid it for your records; you'll need to report these deductions on Form 1040 Schedule D.

Home Office Expenses

If you spend time and funds researching and managing your investments from a home office, then you might be able to deduct expenses associated with these activities. For example, a portion of your computer and Internet expenses can be considered an investment-related expense. You might also be able to deduct a portion of the utility and maintenance charges required to maintain the office. The IRS carefully reviews returns that claim home office expenses, so be sure your records are accurate before taking these deductions.

Earning Income

Keep in mind that your retirement account accumulates gains tax free until you begin taking distributions. When you take a distribution, the amount you take gets added to your AGI, and is taxed by the federal government (and possibly the state government) as income. The IRS assumes that you'll be in a lower tax bracket by the time you begin taking distributions, which is when you reach age 59 1/2.

About the Author

Lisa Bigelow is an independent writer with prior professional experience in the finance and fitness industries. She also writes a well-regarded political commentary column published in Fairfield, New Haven and Westchester counties in the New York City metro area.

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