Ask the Editor, June 20: Questions on Tax Deductions and IRAs

Each week, in our Ask the Editor series, Joy Taylor, The Kiplinger Tax Letter Editor, answers questions on topics submitted by readers. This week, she’s looking at questions on deductions, tax proposals and IRAs. (Get a free issue of The Kiplinger Tax Letter or subscribe.)

1. Brokerage Management Fees

Question: I pay over $6,000 in management fees on my brokerage account. Can I deduct these fees?

Joy Taylor: Unfortunately, an individual cannot deduct management fees paid on a brokerage account (unless it's part of the taxpayer's trade or business). According to IRS Publication 529, Miscellaneous Deductions, “[i]nvestment fees, custodial fees, trust administration fees, and other expenses you paid for managing your investments that produce taxable income are miscellaneous itemized deductions and are no longer deductible.”

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These types of investment expenses used to be deductible as a miscellaneous itemized deduction on Schedule A of the Form 1040, subject to the 2%-of-adjusted-gross-income limit. But the 2017 Tax Cuts and Jobs Act (TCJA) temporarily eliminated that entire group of deductions through the end of 2025. Republican lawmakers are currently negotiating a big tax package, and both the House and Senate's versions of the “One Big Beautiful Bill” would permanently eliminate the deduction.

2. Bonus Senior Deduction

Question: I heard that Congress is going to give senior citizens an extra income tax deduction. Is this true, and how much is the tax break?

Joy Taylor: The House’s version of the “One Big Beautiful Bill” would give a new $4,000 bonus deduction to individuals 65 and up. Married couples with both spouses 65 or older would be able to deduct $8,000 on a joint return. The proposal would first take effect on 2025 federal tax returns filed next year and end after 2028. The deduction would begin to phase out for taxpayers with modified adjusted gross incomes over $150,000 on joint returns and $75,000 on single and head-of-household returns. The Senate’s version of the “One Big Beautiful Bill” also proposes a bonus senior deduction, but the amount would be $6,000 per filer age 65 and up.

Both versions would require filers taking the deduction to have Social Security numbers.

3. IRA Contributions and Taxable Compensation

Question: I am a semi-retired minister for a small church, and I receive a nontaxable housing allowance and a small amount set aside for my pension. I do not receive any salary. I am also receiving Social Security benefits. Can I contribute to an IRA?

Joy Taylor: You must have taxable compensation to contribute to a traditional IRA or a Roth IRA. IRS Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs) (pages 6 and 7), sets forth how to meet this requirement. Your housing allowance would not be considered compensation for purposes of IRA contributions because you do not pay federal income tax on the allowance. Also, your Social Security benefits aren’t considered compensation for this purpose, even if you pay income tax on a portion of your benefits.

Since you don’t have taxable compensation, you would not be able to contribute to a traditional IRA or a Roth IRA.

4. IRA and Basis

Question: A husband and wife both had traditional IRAs, and both have been taking their required minimum distributions. They each have basis in their IRAs derived from making nondeductible contributions prior to retirement. They have been reporting their basis on two Forms 8606 every year. The husband died in 2025, and the wife rolled his IRA into hers. Both have taken their RMDs in 2025. The widow will file a joint return for 2025. But what should the widow do when she files her single return for 2026? How can she get credit for the remaining basis from the deceased spouse?

Joy Taylor: IRS Publication 590-B, Distributions From Individual Retirement Arrangements (IRAs), discusses inheriting an IRA with basis. Here is the relevant language:

"IRA with basis: If you inherit a traditional IRA from a person who had a basis in the IRA because of nondeductible contributions, that basis remains with the IRA. Unless you are the decedent's spouse and choose to treat the IRA as your own, you can't combine this basis with any basis you have in your own traditional IRA(s) or any basis in traditional IRA(s) you inherited from other decedents. If you take distributions from both an inherited IRA and your IRA, and each has basis, you must complete separate Forms 8606 to determine the taxable and nontaxable portions of those distributions."

In the situation you are asking about, the wife treated her deceased husband's IRA as her own when she rolled it into her own IRA. As a result, based on the language above, it seems that she can combine his basis with the basis that she had in her traditional IRA.

About Ask the Editor, Tax Edition

Subscribers of The Kiplinger Tax Letter and The Kiplinger Letter can ask Joy questions about tax topics. You'll find full details of how to submit questions in The Kiplinger Tax Letter and The Kiplinger Letter. (Subscribe to The Kiplinger Tax Letter or The Kiplinger Letter.)

We have already received many questions from readers on topics related to Roth IRA conversions, inherited IRAs and more. We’ll answer some of these in a future Ask the Editor round-up. So keep those questions coming!

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