Congress Urged to Restore Financial Advice Tax Deduction
The economic crisis spawned by the coronavirus pandemic has stimulated securities industry trade groups to seek restoration of the deductibility of investment and financial planning advice.
“The repeal of the deduction may have appeared inconsequential with 2017’s rising stock market, sustained job growth and slowly increasing real wage growth,” Kevin Keller, chief executive of the CFP Board of Standards said in a prepared statement. “But in this moment of crisis, millions of Americans, including many near retirement, are watching the money they worked so hard to earn and to save evaporate virtually overnight. It is crucial that they have affordable access to competent, ethical advice now and in the foreseeable future.”
The five trade groups supporting restoration of the deduction included four representing investment advisors and planners who do not generally sell products in commission accounts as well as the Financial Services Institute (FSI), which represents independent broker-dealers who often work with less affluent investors.
The advice deduction had applied only to taxpayers who paid advisory fees that exceeded 2% of their Adjusted Gross Income (AGI), a limitation criticized as unfairly benefitting upper-income households more than middle-income households.
In a news release promoting the groups appeal for restoration they urged expanding it and eliminating the 2% threshold.
The groups are hoping to have the advice deduction included in a fourth economic stimulus bill that the House and Senate have said they could consider once Congress reconvenes on April 20.
“The advisory fee deduction should be available to all American households, regardless of income, as a matter of tax fairness,” said FSI President and Chief Executive Dale Brown in the prepared statement.
The five trade groups promoting the deduction also include the Financial Planning Association, the Investment Adviser Association and the National Association of Personal Financial Advisors.
Tax legislation has always been a laborious and highly lobbied process, but President Trump has signed into law three pieces of emergency legislation since March 25. They include the approximately $2 trillion “Coronavirus Aid, Relief, and Economic Security Act” (CARES) for businesses and workers and the “Coronavirus Preparedness and Response Supplemental Appropriations Act” that offers paid sick leave, among other things, to coronavirus victims and their families.
“We’ve gotten some positive responses from key legislators and their staffs,” Neil Simon, chief lobbyist for the Investment Adviser Association, said in an email. “While still a long shot, we’re optimistic.”
Maureen Thompson, vice president of public policy at the CFP Board, said the groups are positioning advice deductibility as something that goes beyond taxes.
“It may be a long shot but we know that many people are focused on and concerned about their finances now, whether it is people juggling near-term savings with student loans or other debt, saving for retirement, nearing retirement or in retirement,” she wrote in an e-mail. “People need access to financial advice and planning now more than ever—and any policy change that helps incentivize this will positively impact their ability to better save and manage financial challenges.”