Tax Deductions Checklist for Investors
Retirement and Tax-Advantaged Account Deductions
| Deduction | 2025 Limit | Who Qualifies |
|---|---|---|
| 401(k) / 403(b) contributions | $23,500 ($31,000 age 50+) | All employees with access to a plan |
| Traditional IRA contributions | $7,000 ($8,000 age 50+) | Subject to income phaseouts if covered by employer plan |
| SEP IRA contributions | $70,000 or 25% of compensation | Self-employed individuals and small business owners |
| Solo 401(k) contributions | $70,000 total ($77,500 age 50+) | Self-employed with no employees |
| HSA contributions | $4,300 self / $8,550 family | Must be enrolled in a high-deductible health plan (HDHP) |
Investment-Related Deductions
| Deduction | Details | Limitations |
|---|---|---|
| Capital losses | Offset capital gains dollar-for-dollar; deduct up to $3,000 net loss against income | Excess carries forward indefinitely; watch wash sale rule (30 days) |
| Tax-loss harvesting | Strategically sell losers to offset winners | Can’t repurchase substantially identical securities within 30 days |
| Investment interest expense | Interest on margin loans used to buy taxable investments | Limited to net investment income; excess carries forward |
| Worthless securities | Claim a capital loss when an investment becomes completely worthless | Must document worthlessness; treated as sold on last day of the year |
| Foreign tax credit | Taxes paid to foreign governments on international investments | Credit (not deduction) against US tax; limited to foreign-source income ratio |
Real Estate and Property Deductions
| Deduction | Details | Limitations |
|---|---|---|
| Mortgage interest | Interest on up to $750,000 of acquisition debt | Must itemize; $1M limit for pre-2018 mortgages |
| Property taxes (SALT) | State and local property taxes | Combined SALT cap of $10,000 ($5,000 MFS) |
| Rental property depreciation | Residential: 27.5 years; Commercial: 39 years | Passive activity loss rules apply; $25,000 rental loss allowance for AGI < $150K |
| 1031 Exchange | Defer capital gains by exchanging like-kind investment properties | Real property only; strict 45-day identification / 180-day closing deadlines |
| Cost segregation | Accelerate depreciation on components of commercial property | Requires engineering study; most beneficial for properties > $1M |
| Qualified Business Income (QBI) | 20% deduction on pass-through rental income | Subject to income limits and safe harbor rules for rental activities |
Business and Self-Employment Deductions
| Deduction | Details | Who Benefits |
|---|---|---|
| Self-employment tax (50%) | Deduct half of SE tax from gross income | All self-employed individuals |
| Home office | Dedicated business-use space; simplified: $5/sq ft up to 300 sq ft | Self-employed only (not W-2 employees) |
| Business vehicle | Standard mileage rate: $0.70/mile (2025) or actual expenses | Must keep detailed mileage log |
| QBI deduction | 20% of qualified business income from pass-through entities | Phases out for specified service businesses above income thresholds |
| Business equipment (Section 179) | Immediately deduct up to $1,250,000 of equipment purchases | Phases out when purchases exceed $3,130,000 |
| Health insurance premiums | 100% deductible for self-employed individuals | Cannot be enrolled in employer-sponsored plan |
Charitable Giving Strategies
| Strategy | Tax Benefit | Limit |
|---|---|---|
| Cash donations | Deductible if you itemize | 60% of AGI |
| Donate appreciated stock | Deduct full FMV; avoid capital gains tax entirely | 30% of AGI for appreciated property |
| Donor-Advised Fund (DAF) | Lump deduction now; distribute to charities over time | Same limits as cash/property donations |
| Qualified Charitable Distribution (QCD) | Direct IRA distribution to charity; counts toward RMD; excluded from income | $105,000 per year; must be age 70½+ |
| Bunching strategy | Concentrate 2 years of giving into 1 year to exceed standard deduction threshold | Combine with DAF for maximum flexibility |
Key Takeaways
- Max out tax-advantaged accounts first — 401(k), IRA, and HSA deductions compound over decades
- Harvest tax losses throughout the year, not just in December — but respect the 30-day wash sale rule
- Donating appreciated stock avoids capital gains AND gives you a FMV deduction — double benefit
- Margin interest is deductible against investment income — track it if you trade on margin
- Self-employed investors have access to powerful tools: SEP IRA, Solo 401(k), QBI deduction, and home office
Frequently Asked Questions
Should I take the standard deduction or itemize?
The 2025 standard deduction is $15,000 (single) or $30,000 (MFJ). You should itemize only if your total itemized deductions — mortgage interest, SALT (capped at $10,000), charitable contributions, and medical expenses above 7.5% of AGI — exceed the standard deduction. For most people without a mortgage or significant charitable giving, the standard deduction wins.
What is the wash sale rule?
The wash sale rule prevents you from claiming a tax loss if you buy a “substantially identical” security within 30 days before or after the sale. If triggered, the disallowed loss gets added to the cost basis of the new purchase — it’s deferred, not lost forever. Be careful with automatic dividend reinvestment and purchases in other accounts like IRAs.
Can I deduct investment advisory fees?
Under current tax law (through 2025), miscellaneous itemized deductions — including investment advisory fees, financial planning fees, and subscription services — are NOT deductible for individuals. The Tax Cuts and Jobs Act suspended this deduction. It may return if the provision sunsets after 2025. Fees inside tax-deferred accounts reduce your balance but aren’t separately deductible.
How does the foreign tax credit work for international investments?
When you own international ETFs or foreign stocks, the foreign country often withholds tax on dividends. You can claim a credit (not just a deduction) against your US tax liability for these taxes paid. The credit is generally more valuable than a deduction. For amounts under $300 (single) or $600 (MFJ), you can claim the credit without filing Form 1116.
What is the QBI deduction and does it apply to investors?
The Qualified Business Income deduction allows a 20% deduction on income from pass-through businesses (LLCs, S-Corps, partnerships, sole proprietorships). For investors, this can apply to rental real estate income if you qualify under the safe harbor rules (250+ hours of rental services). It also applies to trading businesses and active real estate professionals. The deduction phases out for high-income service businesses.