Are Financial Planning Fees Tax Deductible?
Right around this time as we approach the end of the year, we get questions related to taxes. How can I be more tax-efficient? What tax deductions are available? We also get the question: are financial planning fees are tax-deductible?
No, they’re not. End of the article, right?Not quite. The tax cuts and Jobs Act of 2017 (TCJA) definitely eliminated the deductibility of financial advisor fees beginning in 2018, however, it is due to sunset at the end of 2025, and in the meantime, we’ve had a higher standard deduction which, in a lot of cases, made it more advantageous not to itemize anyway.
Before the TCJA, the Internal Revenue Code Section 212 allowed individuals to deduct all the ordinary and necessary expenses incurred in the production of income, which includes fees you paid for your financial advice. The deduction only applied for amounts over a 2% floor of your adjusted gross income, so while this is a great tax deduction to have in mind when it returns in 2026, you’ll need to crunch your own numbers to determine it is worth turning down the standard deduction.
While currently, you’re not able to take the financial advisor fees as a tax deduction, there are other ways your advisor can still help you be more tax efficient. Check out more of our articles on our blog for some of those ways your advisor can still add value, even without a tax deduction. In addition, to quote MainStreet’s founder Jim Ludwick, CFP®, “We frequently save clients a lot more than our fee with tax-saving ideas.”