How to Write Off Margin Interest
- 1). Gather your records related to investment income and the interest paid on margin loans. Margin interest can be used to offset investment interest earnings, short-term capital gains and non-qualified dividends. Your brokerage will usually provide this information on a Form 1099.
- 2). Download and print or obtain a copy of IRS Form 4952, "Investment Interest Expense Deduction."
- 3). Complete the Form 4952, entering your margin interest. The form has you list your investment interest expense -- your margin interest -- in the top section, then list the investment earnings which can be offset by the interest. You are allowed to deduct the smallest of the two totals: margin interest or investment earnings.
- 4). Transfer the result from the Form 4952 to the appropriate box on the Schedule A, "Itemized Deductions" of your tax return.
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