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Investment advisor fee and IRA custodial fee questions for California 2020 tax return.

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May 15, 2021
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All investment advisor fee and IRA custodial fee questions below are for California 2020 tax return.

Are investment advisor fees on a Roth 401k deductible on 2020 CA state taxes?

Are IRA custodial fees deductible on 2020 CA state taxes for:

IRA

Roth IRA

401k

Roth 401k

403b

457

Thank you

Best answer by hbl3973

Laurence,

Investment advisory fees are deductible as 2% miscellaneous deductions on your CA tax return only for fees related to taxable income. So, no, those for retirement accounts are not deductible.

It also gets a bit tricky if you have a mix of taxable and tax-exempt properties in a brokerage account. You then need to deduct only the percentage that was related to the taxable portion by, say, using the Dec 31 values of the portfolio entries to come up with that percentage.

hbl3973Answer

Laurence,

Investment advisory fees are deductible as 2% miscellaneous deductions on your CA tax return only for fees related to taxable income. So, no, those for retirement accounts are not deductible.

It also gets a bit tricky if you have a mix of taxable and tax-exempt properties in a brokerage account. You then need to deduct only the percentage that was related to the taxable portion by, say, using the Dec 31 values of the portfolio entries to come up with that percentage.

T

TaxQ8

I was unable to find anywhere in the instructions that investment advisory fees are deductible in California. Can you point me to a reference? They used to be deductible but I thought that had been eliminated. I found documentation that tax prep fees in excess of 2% is deductible. Thanks for your help.

SusanY1

California instructions don't specifically list out the things that make up the miscellaneous itemized deductions, but this is where the investment advisory fees are deductible. They use the federal definitions of these items, but they don't conform to the federal suspension of miscellaneous deductions. Therefore, if the advisory fees along with your other miscellaneous deductions exceed 2% of your AGI, they are deductible on your California return.

They are mentioned (in a roundabout way) in the instructions for Line 21 HERE, "the total amount you paid to produce or collect taxable income." Advisory fees, so long as they are in a taxable account and not a retirement account, are paid to produce taxable income.

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