If I purchased $5000 in stocks for one company (on NASDAQ), will that be counted as an investment expense thus reducing the amount of taxable income that I have for the year?

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    Can you elaborate on what you are asking? It is very unclear right now. The same company as what? Counted as an expense for what purposes? What country are you in? – Bishop May 11 '15 at 16:12
  • @Bishop I believe my latest update will answer all of your questions. – user1477388 May 11 '15 at 16:15
  • Are you talking about taxes in the USA? If so, add that tag – Bishop May 11 '15 at 16:21
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    FYI - Investment Expenses are costs that you incur to make an investment like transaction fees or commissions. The money you invest is not an investment expense. – Alex B May 11 '15 at 17:32

Assuming you are in the US, and are an average joe, the answer to your question is no. Investment costs do not reduce your taxable income for the year you make the investment. They do factor in to the cost basis of your investment and so will affect your taxes in the year you sell the investment.

If you want to reduce your taxable income, you could contribute the $5000 to a traditional ira, or 401k, assuming you qualify. Depending on where the account is held, you may then be able to use that $5k to purchase stock in the company you are interested in. The stock would be held in your IRA or 401k account, and would be subject to more restrictions than a normal brokerage account.

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    I am not sure I understand. I used cash from my bank account to purchase the stock. So, you're saying I should have instead put the cash into a traditional IRA or 401k and then used that to purchase the stock? How is money from an IRA or 401k different from money coming from my bank account? – user1477388 May 11 '15 at 16:58
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    Money from a traditional IRA or 401k is subject to greater restrictions on use than a normal brokerage account(Like the funds cannot be withdrawn without penalty until retirement). In exchange for agreeing to those restrictions, you gain the tax benefits. – Bishop May 11 '15 at 17:07
  • That's interesting - so how does the $5k that I spent on those stocks get calculated into my taxes? Is it just like I spent in on anything else? It's not considered a business expense like would be my office equipment? – user1477388 May 11 '15 at 17:44
  • @Bishop One cannot make a contribution to a 401k plan from money in a bank account; money going into a 401k plan must come from an employer and is a deduction from salary or wages (or employer match, which is also from employer funds, not cash that the employee has in a bank account. – Dilip Sarwate May 11 '15 at 17:48
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    You can potentially see a return from investing in stocks as well, but in terms of lowering your taxes, without knowing more about your business, keeping the money in your business has greater potential to lower your taxes – Bishop May 11 '15 at 18:55

Purchasing stock doesn't affect your immediate taxes any more than purchasing anything else, unless you purchase it through a traditional 401k or some other pre-tax vehicle. Selling stock has tax effects; that's when you have a gain or loss to report.

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