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IRA Fees May be Tax Deductible

Monday, May 04, 2009  No comments

Ever wonder if the fees you pay your bank, broker or insurance company for your IRA could be income tax deductible?

Under certain circumstances you can deduct an IRA trustee's administrative fees that are billed separately, and paid by you, in connection with your IRA. These expenses must be ordinary and necessary. You cannot separately deduct disguised IRA contributions or capital expenditures such as brokers commissions that you must add to the cost of securities you buy through brokers. Deductible trustee fees are not subject to the annual dollar limit on contributions you can make to an IRA. You can deduct them as a miscellaneous deduction on Schedule A (Form 1040). The deduction is subject to the 2% of adjusted gross income limit.

This applies to both traditional and Roth IRAs.

--By Marvin Rotenberg, IRA Technical Consultant; edited by Jared Trexler
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*Copyright 2009 Ed Slott and Company, LLC

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Consumers: Send in Your Questions to [email protected]

Q:
Ed:
I have your book, but unfortunately it is at my cabin so I don't have access right now. I am inheriting a Roth IRA from my wife, who recently passed away at 65. It was converted to a Roth in December 2008.

First question: Is it better to keep it as a separate Roth IRA, or add it into my existing Roth IRA?

Second question: Do I have to take RMDs on this account now or later?

Thanks,
John in AZ

A:
Question 1. As a spouse beneficiary you have two choices, other than taking a complete distribution.

A. You can establish a beneficiary Roth IRA or
B. Make it your own Roth IRA

If you select option B you will not have to take required minimum distributions (RMDs). With Option A, you would be required to take RMDs beginning in the year the deceased spouse would have attained age 70 1/2. Option B gives you the most flexibility. You can take distributions at any time (or not). It is your option. Distributions will be tax-free. Make sure you name your own beneficiary when you select your option.

Question 2. If you make it your own Roth IRA, you could combine it with your own Roth IRA.

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