The Top 10 Business Write-Offs for Small Advisory Firms

Practice Management 4 min • 11 Apr 2024

Running a small advisory firm requires not just financial acumen when managing clients’ portfolios but also savvy business management skills. One key aspect of business management is understanding tax deductions. As financial advisors, you may be adept at guiding clients through complex financial landscapes, but it’s equally important to navigate your own business expenses efficiently.

Here are the top 10 business write-offs that small advisory shops like yours should consider to optimize your tax position.

1. Software and Technology

Investments in software and technology not only streamline operations but also qualify as deductible business expenses. Platforms like Nitrogen, formerly known as Riskalyze, are indispensable tools for enhancing growth and client engagement. They’re not just operational expenses; they’re investments in your firm’s scalability and efficiency. These tools can be written off as business expenses since they are essential for assessing risk tolerance, portfolio management, and client reporting.

Remember, the cost of software subscriptions, CRM systems, financial planning tools, and cybersecurity measures are all deductible. Even the ACH transaction fees associated with a software purchase are a deductible business expense.

2. Professional Development

Continuing education is not just a requirement but a cornerstone for growth in the financial advisory sector. Expenses related to certifications, courses, and seminars are fully deductible, ensuring your expertise remains sharp and relevant.

One of the premier opportunities for professional development in the coming year is the Fearless Investing Summit, scheduled for October 23-25, 2024, in Nashville, TN. This event offers 15+ hours of CFP CE, making it an efficient way to meet your continuing education requirements while engaging in meaningful learning experiences.

You can learn more about the event by visiting www.fearlessinvestingsummit.com.

3. Office Expenses

Whether you lease or own office space, the costs associated with maintaining your office are deductible. This includes rent, utilities, office supplies, and furniture.

If you work from home, a portion of your home expenses may be deductible through the home office deduction. This also includes rent, utilities, and even internet charges.

4. Marketing and Advertising

Investments in marketing and advertising are not just growth drivers; they’re also deductible expenses. This can range from digital marketing campaigns to traditional print ads and sponsoring local events. These expenses are fully deductible as they are directly related to promoting your business.

5. Insurance Premiums

Insurance premiums for professional liability, property insurance, and even health insurance for employees can be significant. These are generally deductible business expenses, helping to lower the overall cost of ensuring your business and staff are protected.

6. Travel and Entertainment

Meeting clients or attending industry conferences? Travel expenses, including airfare, hotel stays, and even a portion of your meals during business trips, can be written off, provided they are strictly business-related. Keep in mind that there are limits and substantiation requirements for these deductions.

7. Communication Expenses

Your phone and internet costs are a lifeline to your clients and the outside world. Whether it’s a landline, cell phone, or internet service used for business purposes, these costs are deductible.

8. Depreciation of Assets

If you’ve purchased equipment for your office, such as computers, desks, or even artwork, you can’t write off the full cost in the year of purchase. Instead, you can depreciate these assets over their useful life, providing a deduction for a portion of the cost each year.

9. Salaries and Benefits

Compensation paid to employees, including salaries, bonuses, and retirement contributions, are deductible. This also includes any subcontractor payments if you outsource certain business functions.

10. Legal and Professional Fees

The fees paid to attorneys, accountants, and consultants that help you manage and grow your business are fully deductible. This includes the cost of tax preparation and any legal advice pertaining to your business operations. These services not only support your business’s compliance and strategic planning but also offer tax advantages.

In conclusion, understanding and applying these write-offs can significantly impact your advisory shop’s operational efficiency and profitability. It’s not just about reducing expenses but strategically investing in areas that drive growth and client satisfaction. Keep meticulous records and consult with a tax professional to ensure you’re maximizing your deductions while remaining compliant with tax laws.

As part of your firm’s strategic toolkit, consider how software solutions like Nitrogen can not only enhance your advisory capabilities but also serve as a smart investment for your business’s growth. Investing in such tools is not merely an operational cost but a strategic move that positions your firm for success—and it’s a deductible one at that. Remember, a penny saved in taxes is a penny that can be reinvested into growing your advisory firm or returned to your pocket. In embracing these top business write-offs, small advisory shops can unlock new levels of growth and efficiency, ensuring that while you focus on your clients’ financial success, your business’s foundation is equally robust and prosperous.

Citations:

https://www.forbes.com/sites/forbesfinancecouncil/2023/04/12/maximizing-your-tax-savings-15-overlooked-deductions-for-business-owners/?sh=3e6474725759

https://www.investopedia.com/articles/tax/11/tax-tips-for-advisors.asp

https://money.usnews.com/financial-advisors/articles/tax-deductions-for-financial-advisor-fees

https://money.usnews.com/financial-advisors/articles/tax-advice-for-independent-financial-advisors

https://smartasset.com/financial-advisor/are-financial-advisor-fees-tax-deductible

https://www.nerdwallet.com/article/investing/tax-efficient-investing

https://www.occ.gov/publications-and-resources/publications/comptrollers-handbook/files/payment-sys-funds-transfer-activities/pub-ch-payment-systems.pdf

https://home.treasury.gov/system/files/136/Future-of-Money-and-Payments.pdf

Share This Story

Related Resources