About Form 4952, Investment Interest Expense Deduction - IRS-2025

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Form 4952 is used to calculate the investment interest expense deduction for the tax year 2023, detailing how to report total investment interest expenses, net investment income, and any disallowed expenses that can be carried forward. It outlines who must file the form, exceptions, and specific instructions for completing each part of the form.

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Begin with Part I by entering your total investment interest expense for 2023 on line 1. Include any disallowed expenses from the previous year on line 2, and sum these amounts on line 3.
Move to Part II to calculate your net investment income. Start with gross income from property held for investment on line 4a, and include qualified dividends on line 4b. Follow through the calculations until you reach line 6, which gives you your net investment income.
In Part III, determine your investment interest expense deduction. Subtract line 6 from line 3 for carryforward amounts and enter the smaller of lines 3 or 6 as your deduction.
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What are the rules for deducting interest expense?

First, it must be an amount paid or payable under a legal obligation to pay interest, and the amount must be reasonable. In addition, when funds are borrowed, the money must have been acquired for the purpose of earning income from a business or earning income from property (i.e. investment income.)

How do you deduct interest expense?

The Internal Revenue Service (IRS) allows taxpayers to deduct several interest expenses, including home mortgage interest and student loan interest. You can itemize investment interest and qualified mortgage interest (including points if youre the buyer) on Schedule A of Form 1040 or 1040-SR.

What investment expenses are deductible for the net investment income tax?

Some common investment deductions are brokerage fees, investment advisory fees, tax preparation charges, local and state income taxes, fiduciary expenses, investment interest expenses and any costs involved with rental and royalty income.

What are the rules for deducting investment interest expense?

You can only take a deduction for investment interest expenses that is lesser than or equal to your net investment income. For example, if you have $3,000 in margin interest but net investment income of only $1,000, you can only deduct the $1,000 in investment interest in the current year.

What is the interest expense rule?

Since the passage of the TCJA, IRC 163(j) provides that the amount of deductible business interest expense in a tax year is limited to the sum of the following: The taxpayers business interest income for the year. 30% of the taxpayers ATI for the year. The taxpayers floor plan financing interest expense for the

form 4952

About form 4952 investment interest expense deduction irs turbo About form 4952 investment interest expense deduction irs example Form 4952 instructions About form 4952 investment interest expense deduction irs 2022 About form 4952 investment interest expense deduction irs 2020 About form 4952 investment interest expense deduction irs 2021 Form 4952 PDF What is investment interest expense

What is the form 4952 investment interest expense?

Investment interest is deductible only to the extent of a taxpayers net investment income. Form 4952 is used to figure the amount of investment interest expenses that the taxpayer can deduct for the tax year and the amount that can be carried forward to future tax years.

Can interest expense be deducted from gross income?

If the interest expense is treated as a capital expenditure, the taxpayer may only claim the periodic depreciation or amortization of such capital expenditure as a deduction from its gross income. The capitalized interest expense shall be depreciated or amortized based on the useful life of the asset.