Tax deductions for investors: what is still deductible, and the records behind it
By Arthur Teboul, DokuTrak · Published
In brief
The tax deductions for investors that remain are investment interest such as margin interest, capital losses up to a yearly limit, and foreign tax paid by your funds. Advisory and account fees are no longer deductible, so the records that matter are broker forms, cost basis and carryovers.
The checklist: Investor’s year-end file: broker forms, basis and carryovers
List every brokerage, fund and bank account first, then tick each form per account, closed accounts included. Wait for the final consolidated form before you send anything, and write "n/a" where a line does not apply.
- PDFPrint it or tick it off on screen.Free, no email
- WordEdit it and send it under your name.Free, with your email
- Excel trackerOne row per item, with a status column.Free, with your email
Build your own list: Answer 10 yes-or-no questions and the tax document checklist generator combines the lists that apply into one checklist.
Forms from each brokerage account
- Consolidated Form 1099, final versionOne per account, including accounts closed this year
- Form 1099-DIV for dividends and fund distributionsInside the consolidated form, or sent alone by a fund company
- Form 1099-INT for interest, including bank and Treasury interestFrom each broker, bank and TreasuryDirect
- Form 1099-B with every saleProceeds, basis where reported, wash sale adjustments
- Form 1099-OID for bonds bought at a discountOnly if the account holds such bonds
- Corrected forms issued after the first mailingCheck the date printed on each form
- Form 1099-DA for digital assets sold through the brokerSeparate from the 1099-B; only if you traded crypto there
Partnerships and trusts
- Schedule K-1 from each partnership or S corporationOften arrives in March or later
- Schedule K-1 from each publicly traded partnershipSent by the partnership, not the broker
- Schedule K-1 from a trust or estateYour share of income for the year
Basis and sales records
- Purchase confirmations for shares bought before 2011Or old statements showing price and date
- Transfer statements for shares moved between brokersThe receiving broker may not show the old basis
- Date-of-death values for inherited sharesFrom the estate or the broker
- Donor’s basis and purchase date for gifted sharesA letter or statement from the person who gave them
- List of buys in other accounts within 30 days of a loss saleIncluding your IRA and your spouse’s accounts
- Proof a stock became worthless this yearBankruptcy filing or broker letter; the loss is dated December 31
Deductions and carryovers
- Margin or investment loan interest statementInterest paid this year, from the broker or lender
- Last year’s return with Schedule D and Form 4952Capital loss and investment interest carryovers
- Last year’s Form 1116, if you filed oneForeign tax credit carried over
- Estimated payments made on dividends and gainsFederal and state, with dates; withholding on a 1099 counts too
What investors can still deduct
Investment expenses, in the IRS sense, are interest paid to buy investment property and costs to manage or collect investment income (IRS Publication 550). Only part of that group still reduces your tax. The fee your adviser takes from a managed account each quarter was a miscellaneous itemized deduction, and those can no longer be claimed (IRS Publication 529). The same goes for safe deposit box rent and service charges on a dividend reinvestment plan (IRS Publication 529), so a wrap-fee statement adds nothing to the return.
What survives is narrow but useful. Margin interest can be deducted as investment interest. Net capital losses offset other income up to a cap. Foreign tax withheld by a fund can become a credit. Each one needs its own record, and the broker’s year-end package holds most of them.
| Item | Treatment | Record to gather |
|---|---|---|
| Margin or investment loan interest | Itemized, up to net investment income; excess carries over (IRS Publication 550) | Broker or lender interest statement, last year’s Form 4952 |
| Net capital loss | Up to $3,000 a year, or $1,500 married filing separately; rest carries forward (IRS Topic no. 409) | Prior-year capital loss carryover worksheet |
| Foreign tax paid by funds | Deduction or credit (IRS Publication 550); no Form 1116 at $300 or less, $600 joint (Form 1116 instructions) | Form 1099-DIV and Form 1099-INT |
| Advisory, custodial and newsletter fees | Not deductible (IRS Publication 529) | Keep the fee statement only for your own budgeting |
| Stock or bond that became worthless | A capital loss, dated as if sold on the year’s final day (IRS Publication 550) | Proof of worthlessness: bankruptcy filing or broker letter |
The consolidated Form 1099 from each broker
A consolidated Form 1099 is one document from a broker that bundles several forms for the same account. It usually holds Form 1099-DIV for dividends, Form 1099-INT for interest and Form 1099-B for sales. Ask for it from every account, including one you closed during the year.
Form 1099-B shows the gross proceeds of each sale, and the IRS gets the same copy (IRS Publication 550). For 2025 sales, you should receive it by February 16, 2026 (IRS Publication 550). Brokers sometimes send a corrected form later, so check the date on the version you hand over. The Form 1099-DIV guide explains its boxes.
Coins such as bitcoin sold through the same broker generally do not sit on the 1099-B. They come on a separate Form 1099-DA, and the crypto records list covers the wallet side that the broker cannot see.
You must file Schedule B when you had over $1,500 of taxable interest or ordinary dividends (IRS Publication 550). That is easy to pass with a few funds, so give the preparer every interest and dividend form, even the small ones.
Cost basis, wash sales and Form 8949
You report each sale on Form 8949, using the Form 1099-B from the broker (IRS Publication 550). For a covered security, which is generally one bought after 2010, the broker should show your basis on the form (IRS Publication 550). For older shares, the broker may not know what you paid. Then the proof is yours: trade confirmations, old statements or a dividend reinvestment history.
A wash sale is a loss sale with a repurchase of substantially identical stock in the window that runs from 30 days before the sale to 30 days after it (IRS Publication 550). It also counts when your spouse buys, or when the purchase is in your IRA (IRS Publication 550). The disallowed loss is added to the basis of the new shares (IRS Publication 550). One broker flags wash sales in its own account, but it cannot see trades at another firm or in an IRA. List those buys yourself.
Shares you inherited or got as a gift have their own basis rules. Keep the value at the date of death for inherited shares. For gifted shares, keep the donor’s basis and purchase date.
Margin interest and Form 4952
Investment interest is interest on money you borrowed to buy property held for investment, such as margin loans at a broker. It is an itemized deduction on Schedule A, limited to your net investment income (IRS Topic no. 505). You figure it on Form 4952 (IRS Publication 550). Interest you could not deduct because of the limit carries over to the next year (IRS Publication 550). That carryover lives on the prior Form 4952, which is why the preparer asks for it every spring.
Qualified dividends and long-term gains normally get lower tax rates. You can choose to count them as investment income to raise the limit, but the part you count loses the lower rate (IRS Publication 550). That choice is a preparer’s call, and it needs the full dividend and gain figures. Interest on money borrowed to buy tax-exempt bonds is never deductible (IRS Topic no. 505).
Schedules K-1, foreign tax and the 3.8% tax
A partnership, an S corporation, a trust or a publicly traded partnership reports your share on a Schedule K-1. These often come later than broker forms. Ask the preparer whether to file an extension, rather than filing without them. The Schedule K-1 guide shows what each part reports.
Foreign tax shows on Form 1099-DIV or Form 1099-INT, and you can take it as a credit or a deduction (IRS Publication 550). You can skip Form 1116 when total creditable foreign tax is $300 or less, or $600 on a joint return, and it is shown on a qualified payee statement (Form 1116 instructions).
The net investment income tax is a 3.8% tax on investment income for higher earners (IRS Topic no. 559). It applies when modified adjusted gross income passes $200,000 for single filers or $250,000 for married couples filing jointly (IRS Topic no. 559). Your broker forms and Schedules K-1 feed Form 8960, so a complete set matters here too.
- Download the final consolidated Form 1099 from every brokerage account.
- Add the Schedules K-1, even when they come in March or later.
- Pull the margin interest statement and last year’s Form 4952.
- Find basis records for shares bought before 2011 or moved from another broker.
- List any buys in another account within 30 days of a sale at a loss (IRS Publication 550).
Questions people ask
Are investment advisory fees tax deductible?
No. They were miscellaneous itemized deductions, and you can no longer claim any of those (IRS Publication 529). Investment fees and safe deposit box rent are on that list (IRS Publication 529).
Is margin interest deductible?
Yes, as investment interest on Schedule A, but only up to your net investment income (IRS Topic no. 505). You figure it on Form 4952, and the excess carries over to next year (IRS Publication 550).
How much in capital losses can I deduct?
The net loss you can claim against other income is the lesser of $3,000, or $1,500 if married filing separately, and your total net loss (IRS Topic no. 409). Any loss above that carries forward to later years (IRS Topic no. 409).
Who pays the net investment income tax?
Individuals with net investment income and modified adjusted gross income above $200,000 single or $250,000 married filing jointly pay a 3.8% tax on the lesser of the two amounts (IRS Topic no. 559).
Sources
- IRS Publication 550: Investment expenses, Form 1099-B timing and basis for covered securities, Schedule B over $1,500, wash sales, worthless securities treated as sold on the last day of the year, the investment interest limit, carryover and Form 4952.
- IRS Publication 529: Miscellaneous itemized deductions can no longer be claimed; they include investment fees and expenses, safe deposit box rent and dividend reinvestment service charges.
- IRS Topic no. 409: Excess capital loss is limited to $3,000 ($1,500 married filing separately) a year, with the rest carried forward.
- IRS Topic no. 505: Investment interest is itemized and limited to net investment income; interest to purchase or carry tax-exempt securities is not deductible.
- Form 1116 instructions: The foreign tax credit can be claimed without Form 1116 when creditable foreign taxes are $300 or less ($600 joint) and reported on a qualified payee statement.
- IRS Topic no. 559: The 3.8% net investment income tax applies above $200,000 MAGI single and $250,000 married filing jointly.
About the author
Arthur Teboul (Founder, DokuTrak) is building DokuTrak after watching professionals lose hours chasing clients for documents over email. Arthur Teboul.
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How this page was made (methodology): it is built from the primary sources listed under Sources, and every rule and figure on it links to the source it comes from. Last updated October 25, 2026. Spotted an error or a rule that changed? Contact us.
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