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My margin Interest $30,000.0 but my Dividend income was $20,000.Can I deduct Entire amount of Margin Interest of $30,000.0 from my income or not, Itemized deduction

Forum|Forum|6 years ago
June 4, 2019
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Margin Interest Charged by My Broker is $30,000. My dividend income is $20,000. I am filing Itemized deduction. Can I deduct entire $30,000 Interest Expense or not.

Please advise

TurboTax Premier Windows

Best answer by suzyquzy

The deduction for investment (margin) interest is limited to the amount of investment income.

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suzyquzyAnswer

The deduction for investment (margin) interest is limited to the amount of investment income.

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nrco1961Author

The unused portion of Interest Expense ($ 30000-20000) $10000, has to carried over. It must be noted/kept by Turbo Tax. Where will it be recorded in my tax forms. Thanks for UR response

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LisaBr

Yes, you can deduct the interest expense from your margin account. If you have purchased taxable securities as investment interest, and you have paid the margin interest in 2017.

You can enter Investment Interest expense as follows:

Go to Federal Taxes.
Select Deductions & Credits
Under Retirement and Investments, choose Investment Interest Expenses.

You can only deduct the portion that was used for investment purposes only. If you use any of the funds for personal such as home-improvements, down payment on car, etc. you may not deduct the interest expense allocated for personal use.

The following link is very helpful regarding deducting this expense:

https://www.irs.gov/pub/irs-pdf/p550.pdf

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Russ18

Hi, Can someone please help. For some reason my investment interest expense just keeps getting bigger and bigger and instead of offsetting the Dividend and Interest income for the year keeps being Carried over to the next year. Turbotax message is that unfortunately "you do not haveenough itemized deductions... Your investment interest expense of $40,810 will be carried forward to 2024"... Why? Could it be that I didn't itemize them? I thought I did ...followed TT's instructions, entered the correct amounts into margin expense, do not see any other options... Funny that with Interest Income and Dividend Income all the boxes get populated directly from my brokerage and never get "carried forward" anywhere and taxed right away. Margin interest expense needs to be entered manually and then it tells me it can't be applied this year? What am I missing?

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DianeW777

Thanks for the reply, however, from what I see my net investment income is higher than the standard deduction of $14,000, so I should have been able to deduct this. I would understand if it was lower than the standard deduction. Sorry if that was not made clear in the original post. So what could have happened if in fact my net investment income was higher than the standard deduction?

@RobertB4444

The net investment income does play a roll in the amount of investment interest expense you can deduct, but the overall itemize deductions must be higher than your standard deduction or they are not used at all. It would seem your standard deduction is higher so that is what is used.

Be sure you complete Form 4952 and answer all the questions in the screens.