Good Morning Gentle Readers,
TWC is often asked if taxpayers can deduct those pesky custodial fees that are imposed on many IRA accounts. It is a frequent question and it seems that taxpayers really want to deduct those fees in a big way. The answer is a qualified Yes.
Don't get too excited though because the CONgress has set up lots of hoops for you to jump through before you can benefit from writing off that $35.00.
Most importantly, if the fee is deducted directly from the account there is no deduction. You must pay it seperately.
So you wrote a check to Merrill Lynch for the IRA fees, but that still doesn't buy you much because you can't deduct the expense unless you itemize your deductions on Schedule A.
Since it turns out that you have a fat mortgage and a ton of property taxes to deduct, you also want to include and deduct the IRA custodial fees. But wait! The fees are considered Other Deductions, like tax prep fees and safe deposit boxes, and are subject to a floor that is essentially two percent of your overall income.
In English, that means that when all those other deductions are added together they have to total more than two percent of your overall income (AGI) before you get one thin dime of tax savings.
Most taxpayers won't qualify.
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