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If you’re paying a financial advisor to guide you through current market havoc, groups representing those professionals want you to nab a tax break for those fees.
A quintet of groups representing financial advisors is calling upon Congress to restore a tax deduction for advisory fees.
“We think it’s good public policy at any time, but especially and critically so now,” said Kevin Keller, CEO of the Certified Financial Planner Board of Standards, one of the organizations supporting the return of the deduction.
Other groups calling for the tax break include the Financial Planning Association, the Financial Services Institute and the National Association of Personal Financial Advisors.
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“People are devastated by the economic crisis that’s been caused by the pandemic,” Keller said. “We believe the public is well-served – especially now – when it has access to competent and ethical financial planning.”
The Tax Cuts and Jobs Act, which went into effect in 2018, roughly doubled the standard deduction, eliminated personal exemptions and curbed certain itemized deductions.
One of the itemized deductions to go by the wayside was a basket of obscure tax breaks known as “miscellaneous itemized deductions,” write-offs you could claim for unreimbursed employee expenses, tax prep fees and financial advisory fees.
Prior to the 2018 tax overhaul, you were only able to claim these miscellaneous itemized deductions to the extent they exceeded 2% of your adjusted gross income.
Since the Tax Cuts and Jobs Act went into effect, taxpayers also have a higher bar to leap over in order to itemize on their returns.
With the higher standard deduction, fewer people are claiming itemized deductions: Consider that in the 2018 tax year, 16.7 million households itemized on their returns, down from more than 46 million in 2017.
Should Congress resurrect the advisory fee tax break, the groups would prefer to see it come back without the 2% of AGI limit, said Keller.
“This threshold, which permitted tax deductions only to the extent they exceeded 2% of a taxpayer’s AGI, unfairly benefited upper-income households more than middle-income households,” said Josephine Colacci, public policy counsel for the Financial Planning Association.