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Ever wonder if you can deduct financial planning fees on your taxes?
It’s a common question, especially when paying for expert advice on growing and managing your wealth.
Under federal tax law, most financial planning and advisory fees are not deductible. This changed with the Tax Cuts and Jobs Act, which suspended many itemized deductions, including those for general financial advice, through 2025.
That said, there are important exceptions. If the fees relate directly to producing taxable income or managing investments in specific ways, deductions may still be available in particular situations.
At BetterWealth, knowing how tax rules affect your planning fees helps you build a more innovative, intentional wealth strategy.
In this blog, we will talk about:
Let’s break it down so you can plan clearly and avoid surprises at tax time.
Financial planning fees vary depending on the services you need and how advisors charge you. Knowing the types of services, how fees are structured, and who pays the fees gives you better control over your financial planning costs.
Financial planning isn’t one-size-fits-all; it covers various services depending on your goals and life stage. Here are the main types you might come across:
Some advisors specialize in one area, while others take a holistic approach, helping you integrate all these elements into one comprehensive financial plan.
Financial planners use different fee models, and understanding them helps you pick one that best suits your needs and budget.
Fee Type
How It Works
Key Benefit
Consideration
Flat Fee
Fixed amount for a specific service
Clear upfront cost
May not cover ongoing support
Hourly Fee
Pay for the advisor’s time, billed hourly
Flexible if you need limited guidance
Costs can add up with frequent use
Percentage of AUM
Typically, ~1% of assets managed
Advisor’s success tied to your growth
Fees rise as your portfolio grows
Knowing these structures makes it easier to compare advisors and select the arrangement that aligns with your financial goals and comfort level.
You, as the client, typically pay financial planning fees directly. These fees may come out of your investment accounts or be billed separately. Sometimes, payments are deducted from managed assets, reducing your investment returns. In some cases, advisors may receive commissions from financial products they sell.
It's important to ask how your advisor earns money so you can spot any potential conflicts of interest. Knowing who pays and how fees are charged lets you make clear, informed decisions about your financial planning.
Knowing which financial planning fees you can deduct depends on specific tax rules. Understanding the laws, conditions for deductions, and what fees qualify will help you make better choices when planning your taxes and finances.
Before 2018, you could deduct financial planning and investment advisory fees as miscellaneous itemized deductions. These fees were grouped under IRS Section 212, allowing deductions for expenses related to producing income. However, the Tax Cuts and Jobs Act (TCJA) 2017 suspended these miscellaneous deductions from 2018 through 2025.
This means most financial planning fees are no longer deductible on your federal return. Some states still allow deductions on their tax returns, but federal law currently does not. Keep an eye on your state's rules, as they can differ from federal guidelines.
To deduct financial planning fees, your expenses must be directly related to managing or producing taxable income. This generally means fees tied to investment advice for taxable accounts.
You must also itemize your deductions to claim these fees. If you take the standard deduction, you cannot deduct these expenses. Since the TCJA suspended miscellaneous deductions, this option is currently unavailable at the federal level. If your financial planning fees are part of your business or self-employment expenses, they may be deductible under a different set of IRS rules.
Eligible fees typically include:
Ineligible fees include:
Since personal financial planning fees fall outside investment-related expenses, most do not qualify for federal deductions. Your financial advisor can help clarify which fees may be deductible based on your unique situation.
When you pay for investment advice or management, tax rules have changed how much of these costs you can deduct. Understanding which fees qualify and how recent laws affect deductions helps you plan your finances with more control.
Since 2018, the Tax Cuts and Jobs Act (TCJA) has eliminated the federal tax deduction for most investment advisory fees. Before this change, you could deduct fees like financial planning or investment management if you itemized deductions and they exceeded 2% of your adjusted gross income (AGI).
These fees are no longer deductible through 2025 unless Congress changes the law again. You should know that this means costs for typical investment advice won’t lower your taxable income. However, some specialized planning, like business-related financial advice, might still qualify in limited cases.
Investment advisory fees usually refer to costs tied directly to managing your investments. These typically include fees charged by brokers, money managers, or financial advisors for portfolio management. These fees are generally not deductible now. Financial planning fees, on the other hand, can cover a broader range of services, including retirement, tax, or estate planning.
While many planning fees are also non-deductible under current law, related expenses for running a business or producing taxable income may still be deductible.
Key distinctions:
Fee Type
Typical Deductibility Status
Investment Advisory
Not deductible under current tax law
Personal Financial Planning
Not deductible for most taxpayers
Business-related Planning Fees
May be deductible if tied to business income
Understanding these differences helps you decide which fees may affect your tax situation and which won’t.
Not all financial planning fees qualify for tax deductions. You need to understand when fees are considered personal or business expenses. Also, some common examples of fees do not meet IRS rules for deductions, even if they relate to your investments.
Financial planning fees related to personal advice are usually not deductible. This includes help with retirement planning, budgeting, or general financial goals. These fees are treated as personal expenses by the IRS. You might qualify for a deduction if your planning fees are directly tied to your business or income-producing activities.
For example, fees paid for managing a rental property or business investment advice could be deductible as a business expense. You must clearly separate personal financial planning from investment or business-related expenses. Without this clear link to income production, fees remain non-deductible through tax year 2025.
Not every fee you pay to a financial advisor qualifies for a tax deduction. Here are the most common non-deductible charges:
Fee Type
Description
Deductible?
Hourly or Flat Fees
Payments for general financial advice, estate planning, or retirement strategies
❌ Not deductible
Investment Management Fees
Fees for managing personal investments
❌ Not deductible
AUM (Assets Under Management) Fees
Bundled percentage-based fees are charged on your portfolio
❌ Not deductible
One-Time Consulting Fees
Project-based or hourly planning unrelated to business income
❌ Not deductible
Since the 2018 Tax Cuts and Jobs Act, these expenses no longer qualify for deductions unless directly tied to income-generating investments or business activities.
Some financial planning fees may still offer tax benefits depending on your situation. These exceptions mainly apply if you run a business or manage trusts and estates.
If you own a business or are self-employed, you can often deduct financial planning fees as a business expense. This applies when the costs relate directly to your business operations, such as managing investments or planning for business growth.
To qualify, you must show that the fees are ordinary and necessary for running your business. This can include advice on employee retirement plans, tax strategies, or managing business assets. Keep detailed records of how the fees tie to your business income. Fees for personal financial planning, separate from your business, are generally not deductible. To avoid errors, be clear on business and personal finances.
Financial planning fees connected to trusts or estates may also be deductible. These fees must be necessary for managing the trust or estate’s assets or producing income within that entity. Examples include costs for investment advice, tax preparation, or legal planning tied to the trust or estate.
Unlike individual taxpayers, trusts and estates file separate tax returns, and these costs can offset taxable income. Keep documentation that ties the fees directly to trust or estate management. Personal expenses paid from trust funds are not deductible. Proper accounting helps ensure you claim only qualified expenses under the law.
You can reduce the impact of financial advisor fees through thoughtful planning. Some approaches include combining multiple services or finding other ways to lower your overall tax burden.
Bundling services means working with your advisor on several financial needs at once. For example, you might combine retirement planning, tax strategy, and estate planning into a single package. This often lowers overall fees because you pay less than if you bought each service separately. Bundling services can also improve tax efficiency.
Advisors can design your plan to optimize tax deductions or credits where possible. While fees are generally not deductible now, bundling may help you get more value from your advisor’s work. It also simplifies your financial management since one expert handles everything together. Ask your advisor about package or retainer agreements to save money and streamline your financial planning.
Since advisory fees are not deductible due to current tax laws, you’ll want to explore other tax-saving options. One way is to use tax-advantaged accounts like IRAs or HSAs, which lower your taxable income. Another method is to take advantage of The And Asset®, a BetterWealth strategy that combines overfunded whole life insurance with tax benefits. This approach can help build cash value while protecting your legacy and offering living benefits.
You can also review your portfolio for any tax-loss harvesting opportunities. Selling investments at a loss can offset gains and reduce taxes owed, indirectly helping you keep more money to cover advisory fees. Look for credits, deductions, or business expense write-offs if you qualify. Intentional tax planning lets you manage costs better, even if direct deductions aren’t available.
Keeping clear records is key when dealing with financial planning fees and taxes. Although these fees are generally not deductible for most people today, good documentation helps you track your expenses and support any future claims if the law changes. You should save all invoices, receipts, and statements related to fees paid to your financial advisor or planner. These documents prove the amount and purpose of the fees.
Without them, it’s hard to show the IRS that the expense is valid. Organize your records by date, type of service, and payment method.
Use a simple table like this to keep track:
Date
Service Type
Amount Paid
Payment Method
Notes
03/01/2025
Financial Planning
$500
Credit Card
Annual review session
06/15/2025
Tax Strategy Advice
$300
Check
Pre-tax season planning
You might qualify for some deductions if you are self-employed or own a business. Ensure your documentation clearly shows how fees relate to income production or business activities.
Keep digital copies backed up in a secure place. This protects your records from loss or damage and speeds up tax preparation. Tracking these details also helps you discuss your finances more efficiently with your advisor. You stay in control of your wealth and are ready for any changes in tax law.
Financial planning fees are currently not deductible on your personal federal tax return. This rule comes from the Tax Cuts and Jobs Act (TCJA) of 2017 and remains in effect through 2025. The law suspended miscellaneous itemized deductions, including these fees. However, changes could occur after 2025.
Lawmakers may revisit tax rules and reconsider restoring some deductions. If this happens, you can deduct financial planning fees again, especially those linked directly to income-producing investments. If you run a business or are self-employed, specific financial planning fees related to your business might still qualify as deductible expenses. This distinction is important in your tax planning.
Here’s a quick look at what might affect deductibility soon:
Factor
Impact on Deductibility
Expiration of TCJA Suspension
Potential return of deductions in 2026 or later
Business Use of Financial Fees
Possible deductions if fees relate to business or self-employment
Law Changes & New Legislation
Could revise or limit what fees qualify
Tax laws about financial planning fees can be complex and change often. Since fees for financial advice are generally not deductible for individuals from 2018 through 2025, you need expert help to understand your situation.
A qualified tax professional can review your finances and clarify whether any exceptions apply to you. They also stay current on evolving tax codes, which helps you make informed decisions.
Here are a few reasons to consult a tax expert:
When you meet with a tax advisor, be ready with detailed records of your financial planning costs. Clear documentation supports your claims and speeds up preparation. Consider scheduling a consultation to see how personalized tax advice complements strategies like The And Asset®. This alignment can help you protect and grow your wealth effectively.
Still unsure about how financial planning fees fit into your taxes? You’re not alone; many people have specific questions about unusual situations or details that don’t get explained clearly. Let’s answer some of the most common ones that could impact your financial strategy.
No, fees for retirement accounts like 401(k)s or IRAs aren’t deductible on your federal return. The IRS treats them as personal expenses. However, the fees can reduce your account’s earnings, indirectly lowering your taxable growth.
Some states allow deductions for financial planning fees even though federal law does not. Rules vary widely, so check your state’s tax code or talk to a local tax professional. This difference can create small but valuable savings.
Yes, many advisors deduct their fees directly from your investment account. While this simplifies payment, it reduces your account’s balance and potential growth. It doesn’t change deductibility; the IRS still considers these non-deductible personal expenses for individuals.
No, commissions are not deductible as planning expenses. They are considered part of the cost of buying financial products, like insurance or mutual funds. They don't qualify under current tax rules since they aren’t tied to producing taxable income.
Yes, you can focus on tax-efficient strategies instead of fee deductions. Examples include using IRAs or HSAs to lower taxable income, applying tax-loss harvesting, or leveraging strategies like The And Asset® for tax-advantaged growth and protection.
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