Are Your Financial Advisor Fees Tax Deductible?

Living in 2025 is expensive, and there is really no denying it. The cost of housing has gone through the roof, making it more challenging than ever to put a roof over your own head. Rent continues to consume a significant portion of people’s incomes, while buying a home feels like an unattainable dream for many families. Furthermore, private schooling and college education in the U.S. have long been viewed as luxuries, and in today’s world, they have only become more challenging to afford. Retirement homes and healthcare are another significant expense that can overwhelm anyone planning for the future.

When you factor in the cost of financial advisor fees, it often feels like there is no real respite for the average person. But there might be a silver lining in the form of tax deductions. These deductions help you lower the overall outflow of cash for the year.

That said, when it comes specifically to financial advisor fees being tax-deductible, things get more complicated. A cloud of uncertainty surrounds the matter in 2025. Tax laws have evolved, and the rules today are not as straightforward.

The question that keeps coming up is simple - Are investment management fees still tax-deductible or not?

To truly understand, you need to delve into the essence of it. So, let’s get started.

Are financial advisor fees tax-deductible in 2025?

Long answer short - Years ago, you could actually deduct certain financial advisor costs. Unfortunately, under today’s tax code, that is no longer the case.

Now let’s move to the longer answer that can help you understand what exactly happened:

In 2017, the Tax Cuts and Jobs Act (TCJA) significantly altered many aspects of the United States’ tax system. Among its many changes was the elimination of miscellaneous itemized deductions. These were deductions you could claim for expenses related to taxable income. Before the TCJA, this included items such as financial advisor fees, Individual Retirement Account (IRA) custodial fees, legal and accounting costs associated with investments, and even trustee fees.

The rule worked like this:

You could only claim those expenses if, when added together, they exceeded 2% of your Adjusted Gross Income (AGI). So, let’s say your AGI was $100,000. You would need more than $2,000 in qualifying expenses before anything was deductible. Not everyone benefited from this rule, but for investors with higher costs, it was a valuable way to mitigate the tax burden.

That all changed with the TCJA. Starting in 2018, these deductions were eliminated, and the law made this change effective through 2025. For years, investors have been unable to deduct financial advisor fees or other investment-related costs. The more recent One Big Beautiful Act extended that provision even further, continuing to keep these fees non-deductible.

So where does that leave you today?

Simply put, in 2025, financial advisor and investment fees are not tax-deductible. If you are paying a percentage of Assets Under Management (AUM), hourly charges, or any other form of payment to a professional, none of that reduces your taxable income under the current rules.

However, the TCJA did not erase these deductions forever. It only suspended them through 2025. Unless Congress acts to extend or make those rules permanent, many of the law’s individual provisions, including the elimination of miscellaneous itemized deductions, are scheduled to sunset after December 31, 2025. Barring corporate tax cuts, which are permanent, other tax provisions may return. So, when it comes to individual taxpayers, a lot of the changes, including this one, expire.

What that means for you is simple. Starting in tax year 2026, if the law is allowed to expire, you may once again be able to deduct financial advisor fees along with other similar expenses. That would put the system back to the way it was before 2018, where qualifying costs above the 2% AGI threshold could reduce your taxable income.

The current administration could choose to extend or modify TCJA provisions. Or, Congress could allow them to expire as scheduled. As of now, you can do nothing but wait and see what the future holds.

Are there any exceptions where financial advisor or broker investment advisory fees are tax-deductible?

Remember when you were a kid and your parents wouldn't let you have candy every night? But on special occasions, like birthdays, movie nights, or road trips, exceptions were made, and you could go wild with sweets. Tax laws work in a similar way. The door is not completely shut. Much like your parents did with candy, there are exceptions in situations where the costs are deemed necessary.

While the general rule is that financial advisor fees are not tax-deductible for most individuals in 2025, there are three exceptions where deductions are allowed:

• The first exception is for retirement plans. If you are a business owner managing or administering a 401(k) retirement plan, the investment fees are tax-deductible. These costs are considered a part of business expenses. Investment advice for the plan may help you knock off some of your taxable income for the year.
• Business-related investment advice may also be tax-deductible. If you run your own business or are a professional who deals with investments directly tied to your work, the money you pay a financial advisor might be tax-deductible.
• Thirdly, if you are acting as a trustee or handling an estate, fees related to managing those assets may qualify as deductible expenses for your financial advisor.

Does that mean you should stop hiring a financial advisor altogether?

Of course not. Working with a financial advisor has always been about much more than just getting a tax deduction. Sure, back when financial advisor fees were deductible, you could lower your tax bill and enjoy an extra advantage. But even without this perk, the value of having a professional by your side is far greater. A financial advisor can help you grow your wealth, keep you focused on your long-term goals, and guide you through several financial decisions over the years.

If you are worried about losing out on tax savings, remember this: financial advisors are usually the very people who can help uncover other, often bigger, ways to save on taxes. From retirement contributions and gifts to charity and trusts, there are plenty of provisions that you may not be aware of, but an experienced advisor will be.

So no, the loss of a tax deduction should not be the reason you walk away from professional guidance. And if you did go to your financial advisor, they would tell you about the following provisions that could still help you lower your tax liability for the year.

Tax deductions you can still make from your investments in 2025

You have plenty of tools at your disposal to reduce your tax liability. Let’s look at some of these:

1. Tax-loss harvesting

If you have had a rough year in the market and have incurred investment losses, you can claim them as tax deductions. Capital losses can be used to offset your capital gains. If your losses are bigger than your gains, you can deduct up to $3,000 against your ordinary income and $1,500 if you are married and filing separately. If your net losses go beyond that $3,000 limit, you can carry them forward into future tax years and claim deductions later.

2. Retirement account contributions

If you have access to a 401(k) or a traditional IRA, make sure you are taking full advantage of it. Contributions to these accounts reduce your taxable income in the year you make them, offering you an immediate tax break while also helping you build long-term wealth.

For 2025, the 401(k) contribution limit is $23,500 if you are under 50. If you are over 50, you can make catch-up contributions and invest up to $31,000. If you are between the ages of 60 and 63, you can make a special catch-up contribution of $11,250 and invest $34,750 annually.

For IRAs, the limit sits at $7,000, with an extra $1,000 available if you are 50 or older. These numbers, when consistently maxed out on these accounts, can grow your nest egg while also lowering your tax bill each year.

3. 529 college savings plans

A 529 plan lets you grow your money tax-deferred, and withdrawals are tax-free as long as they are used for qualified education expenses. The plans help you cover tuition, books, study equipment, and even room and board in many cases. While the contributions themselves are not deductible at the federal level, many states offer deductions or credits for contributing to a 529 plan. So, depending on where you live, this could be a double win.

4. Health Savings Accounts (HSAs)

An HSA is another gem when it comes to tax advantages. If you have a high-deductible health plan, you are eligible to open one. Contributions are tax-deductible, the growth inside the account is tax-free, and withdrawals for qualified medical expenses are also tax-free. For 2025, the HSA allows an individual to contribute up to $4,300 and $8,550 for a family. Individuals age 55 and up can make an additional contribution of $1,000 to their HSAs.

You can let your HSA balance grow and even invest it. Considering how expensive healthcare can be in retirement, this account can be both a tax tool and a long-term safety net.

5. Qualified dividends and investment interest expense

Now let’s talk about dividends. Normally, qualified dividends receive preferential tax treatment at lower rates, such as 15% or 20%. But there is a little-known option. You can choose to treat qualified dividends as ordinary income for tax purposes. Why would you ever want to do that? Because it could increase your investment interest expense deduction.

Here’s how it works:

If you have borrowed money to invest, like through a margin loan, the interest you pay may be deductible, but only up to your net investment income. When you treat qualified dividends as ordinary income, you may raise that cap and increase the deduction, which could reduce your overall tax burden. That said, you should carefully run the numbers or work with a tax professional to ensure this strategy makes sense for your situation.

6. Investment interest expense deduction

Speaking of investment loans, this deduction is another one you should not overlook if it applies to you. If you itemize, you can deduct the interest you paid on the money you borrowed to purchase taxable investments. For instance, loans you may have used to buy stocks or even investment property can help you.

The catch is that the tax deduction is capped at your net taxable investment income for the year. But just like with tax-loss harvesting, there is some flexibility here. If you can’t deduct it all in one year, the leftover interest can be carried forward to future years. However, keep in mind that this does not apply to loans used for tax-advantaged investments, like municipal bonds, since those generate tax-free income.

So, what should you do to save tax in 2025?

First things first, accept the current reality. Financial advisor fees are currently not tax-deductible. Therefore, you should plan your taxes as if this benefit did not exist, because it does not currently exist. But do not stop paying attention to the bigger picture. Tax rules change all the time. If the deduction for financial advisor fees is reinstated in 2026, you will want to be prepared.

In the meantime, your focus should be on the tax strategies that are available to you today. And here is where working with a financial advisor can really pay off. A financial advisor can walk you through the maze of deductions, credits, and strategies that can help you save taxes. If you already work with one, lean on them now to create a tax strategy for 2025. And if you do not have a financial advisor yet, what are you waiting for? Use our free advisor match tool to find an advisor who specializes in tax planning and fits your needs.