Investors are allowed to deduct expenses incurred in the production or collection of income and in the management and conservation of property held to produce income, even though they were not incurred in the course of a trade or business. The IRS eliminated this deduction but it is still available in some states.
Some expenses allowable include:
While these expenses are deductible, they are subject to various limitations and are never 100% deductible as they would be if you had filed as a trader. High income tax taxpayers with significant capital gains or other income may get 0 benefit from these deductions as they are deductible only to the extent allowed by state law.
The above problems can be sidestepped if you are a qualified trader and report these expenses on Form 1040 Schedule C.
SOME OF THE LIMITATIONS FACED BY INVESTORS