Most people who invest in stocks don’t do it for a living – that makes a difference in terms of some deductions.
The IRS says you must be a trader to qualify for some of the business tax breaks it offers.
The IRS has some tests that define traders, which include making a large number of trades each year (we’re talking well over a thousand).
You must also do this full time. If you have another job or only trade part-time, the IRS may deny you trader status.
If you qualify for trader status with the IRS, you will be able to deduct a number of business expenses that are not available to investors.
It is a good idea to contact your tax professional about obtaining IRS qualification if you want trader designation.
For investors, you have capital gains and losses to deal with, but you can’t directly deduct commissions on trades.
Commissions are added to the proceeds to increase or reduce the basis, so there is some benefit.
You can deduct some forms of investment counsel and advice, however you can’t deduct traveling to a resort for a week to attend a six-hour counseling session.
The bottom line is your safest course of action is to discuss what is and is not deductible with a qualified tax professional.
Keep good records and you will not have problems with the IRS – you hope.