How to Claim the Investment Interest Deduction

If you borrowed on margin to buy securities last year, your tax deductibles can include the interest you paid on the loan, provided that you fulfill the IRS's requirements.


This page:

  • Briefly describes investment loan interest tax deductions

  • Lists basic criteria for claiming any loan interest tax deductions.

  • Explains the procedure for claiming loan interest tax deductions

How much margin interest can be deducted?

Interest paid on a margin loan that is used to purchase securities is included in your tax deductibles, up to the entire cost, if you qualify under the IRS's income and filing requirements.

You are allowed to claim up to $2500 of investment loan interest as tax deductions.

How to claim investment loan interest at tax time

First of all, find out if you qualify. To claim any investment interest tax deductions, your income cannot exceed:

  • $55,000 if you are single (phase-out begins at $40,000)
  • $75,000 if you file jointly (phase-out begins at $60,000)

Also, the total interest paid cannot exceed your total investment income. If this happens, the leftover amount is carried over into the following year's tax deductibles and calculated into that tax return.

To claim any investment loan interest tax deductions, calculate the interest you paid, then figure out the total amount that can be included as part of your tax deductibles by using IRS Form 4952. Enter the total allowable investment loan interest on Schedule A, and attach it to your paper tax return. If you do your taxes online, these tax deductions will be calculated and the forms will be completed for you.

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Related IRS publications

You can get more information about the investement interest tax deduction directly from the IRS, in the form of IRS Publication 550. This publication also deals with another favorite subject, capital gains and losses.

Note: you will need an Adobe Acrobat Reader to view these publications, which you can get here. (But you probably already have it.)