If you make a profit or generate income from your investments, the Internal Revenue Service typically wants a cut of the action.

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To be fair, if you take a loss on a securities trade, the IRS lets you write that amount off on your taxes, at least to the maximum allowed by law. You can also deduct a number of investment-related expenses when you file your federal income tax return, but commissions in of themselves are not one of them.

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Whether you use a full-service investments broker, a discount broker or an online firm that lets you trade stocks with the click of a mouse, you are probably paying a commission on every trade.

You typically pay a commission when you buy, and you pay another commission when you sell. The IRS does not consider investment commissions to be a tax-deductible expense. Instead, the commission becomes part of the investment's cost basis, which still provides you with some tax relief.

Your personal investments are capital assets for federal income tax purposes. A capital asset might appreciate or depreciate in value, but unless it is used for business purposes, there are no tax implications until you sell the asset. An investment's cost basis is usually its purchase price plus the cost of purchase, which typically includes commissions and recording fees.

You can also subtract the cost of sales from the sales price when you dispose of your investment. This serves to reduce your gain or increase your loss on the investment. While you can't deduct the cost of your investment commissions, you can deduct a number of investment-related expenses as miscellaneous expenses, provided you itemize your deductions on Schedule A.

You can deduct only the total amount of your miscellaneous expenses that exceeds 2 percent of your adjusted gross income.

Deductible investment-related expenses include the cost of software you use to manage your investments, fees or investment counseling, subscription costs to investment publications, safe-deposit box rental fees if you use the box to store securities such as stock certificates, and transportation costs to and from your broker or investment adviser's office. Mike Parker is a full-time writer, publisher and independent businessman.

He helped launch DiscoverCard as one of the company's first merchant sales reps.

Skip to main content. Salary] Tax Rates on Commissions Vs.

Salary 3 [Adjusted Gross Income] How to Calculate an Adjusted Gross Income for the Self-Employed 4 [Report Unearned Income] How to Report Unearned Income for Foreign Income Exemptions. Nondeductible Whether you use a full-service investments broker, a discount broker or an online firm that lets you trade stocks with the click of a mouse, you are probably paying a commission on every trade. Depreciation Your personal investments are capital assets for federal income tax purposes. Cost Basis An investment's cost basis is usually its purchase price plus the cost of purchase, which typically includes commissions and recording fees.

Deductible Investment Expenses While you can't deduct the cost of your investment commissions, you can deduct a number of investment-related expenses as miscellaneous expenses, provided you itemize your deductions on Schedule A. Topic — Traders in Securities Information for Form Filers IRS: Sales and Trades of Investment Property IRS: Topic — Capital Gains and Losses IRS: Ten Important Facts About Capital Gains and Losses.

Resources 2 Smart Money: Writing Off Your Investment Costs Charles Schwab: About the Author Mike Parker is a full-time writer, publisher and independent businessman. Suggest an Article Correction. More Articles [Tax Implications] Tax Implications of a Short Term Loss [Sales Commissions] How to Handle Sales Commissions in Financial Statements [Tax Write-Offs] Tax Write-Offs for Investor Properties [Group Insurance] Can I Get a Group Insurance Through My S Corporation With 2 Employees?

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