Deductability of safe deposit box rental

Question

1. Theoretically, the cost of renting a safe deposit box IS deductable on federal taxes "if the box is used for storing stocks,bonds, or investment-related papers and documents." Does anyone know how broadly "investment-related documents" is interpreted? In specific, if I use the box to store a digital backup of my financial records including those of my taxable investments, would that qualify?

2. Theoretically, the cost of renting a safe deposit box is NOT deductable on federal taxes if it was used to store "jewelry or other personal items" or "tax-exempt, as opposed to taxable, securities." Is there an implied "only" in there -- ie, if the box contained both the financial records and something else, would that still qualify?

3. If both the above are true... then renting a safe deposit box to store a complete backup of the system which includes the financial records ought to be deductable. Right? (Left? Three?)

Not an immediate issue, just planning ahead. If I can deduct the box for my personal offsite backup, that'd be cool.

Answer 1

In specific, if I use the box to store a digital backup of my financial records including those of my taxable investments, would that qualify?

No. Long time ago stock ownership came in certificates which were printed on paper and you had to safeguard them. Bonds were also pieces of paper and paid to whoever presented the paper. Keeping them in a safe was a necessary precaution to not lose your investment. This is not the case with your backups of financial records. It's a good precaution, but not a necessary one due to the nature of the asset you own, like with the anonymous bonds or stock certificates.

I doubt there's anything you can store there that can justify the safe as an investment expense nowadays, unless maybe you fill it with gold bulions.

• ie, if the box contained both the financial records and something else, would that still qualify?

No. This points out that you can't take a tax benefit when you don't have a tax liability.

If both the above are true... then renting a safe deposit box to store a complete backup of the system which includes the financial records ought to be deductable. Right? (Left? Three?)

Neither is true, as you can see.

Answer 2

From IRS pub 529 Miscellaneous Deductions:

Safe Deposit Box Rent

Rent you pay for a safe deposit box you use to store taxable income-producing stocks, bonds, or investment related papers is a miscellaneous itemized deduction and can no longer be deducted. You also can't deduct the rent if you use the box for jewelry, other personal items, or tax-exempt securities.

The tax code changes in late 2017 eliminated the miscellaneous deductions. Even it it hadn't I believe that you needed your total miscellaneous deductions to exceed 2% of AGI. I don't think that very many people made the threshold.