Tax deductions: Keep track of the small stuff

Unless miscellaneous deductions add up to more than 2 percent of your adjusted gross income, they won't save you anything at tax time. Therefore, the more miscellaneous deductions you can report, the better the chance they'll exceed 2 percent of your AGI. Here are some you may find in your records.

Investment advisers' fees

The cost of portfolio management or investment advice, as distinguished from sales commissions, is a miscellaneous expense. If your counselor or money manager buys and sells for you, his statements should separate advisory fees (usually billed quarterly) from other costs.

Some brokerage houses offer "wrap" accounts, where you pay a set annual fee—a percentage of assets—to cover both portfolio management and transaction costs. The IRS might not question your deduction of the full fee, provided none of it is allocated directly to transaction costs.

What if you get investment guidance from a financial planner who also counsels you on insurance and other family matters? Have him break down his bill to show how much he's charging for investment advice.

Home computer

If you use a computer to help with your investments, you can depreciate part of its cost whether or not you're also claiming some of it as an employee practice expense. Figure how many hours you used the computer for help with your investments and for other business purposes (including tax records and calculations) in 2003. Divide that by the total hours of use for all purposes to get your annual percentage use. Say that's 40 percent, and the computer cost $3,000. You can depreciate $1,200, taking 10 percent the first year, 20 percent each in years two through five, and the remaining 10 percent in the sixth year. (Faster write-offs may be permissible if you also use the computer more than 50 percent of the time for your practice or a sideline business.)

Service charges

You can deduct fees paid to a bank or other agent for serving as custodian of your taxable-bond portfolio or mutual-fund shares, collecting interest, reinvesting dividends, maintaining records, and the like. Also deductible is the rent on a safe deposit box in which you keep securities or investment-related documents.

Travel expenses

The law won't let you write off expenses to attend a convention or seminar for investment purposes, and the IRS frowns on deductions for travel to shareholders' meetings simply to get information about companies you own stock in. But if you have a say in the operation of the company or a good reason to confer with management, you can make a case for claiming your travel costs. Trips to inspect property are deductible if you already have a stake in it, but not if you're just looking to invest.

—Staff Editor Vicki F. Brentnall

 

Vicki Brentnall. Tax deductions: Keep track of the small stuff. Medical Economics Oct. 10, 2003;80:85.