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Tax Deduction Consulting: Margin Loan Interest Rutland VT

Is the interest paid on the margin loan deductible as investment interest? Ultimately, the answer is going to lay in the use of the loan funds. The IRS allows interest as a deduction when the loan proceeds are used for the purpose of income producing investments.

Alpha Omega Tax And Investment
(802) 878-6155
1 Market Pl Unit 22
Essex Junction, VT
 
Associates In Accounting
(802) 878-9619
6 Pinecrest Dr
Essex Junction, VT
 
H&R Block Inside The Centre
(802) 388-3190
260 COURT ST
MIDDLEBURY, VT

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Danaher Attig & Plante PLC
(802) 383-0399
150 Kennedy Drive
South Burlington, VT
 
Liberty Tax Service
(866) 871-1040
972 Putney Rd # 6
Brattleboro, VT

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Liberty Tax Service
(866) 871-1040
1197 Williston Rd
South Burlington, VT

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Kupiec Al & Associates
(802) 879-1509
58 Pearl St
Essex Junction, VT
 
H&R Block Inside St Albans Commons
(802) 524-3140
178 SWANTON RD
SAINT ALBANS, VT

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Jacob Philip H Tax And Business Services
(802) 862-8889
12 Perrotta Pl
Burlington, VT
 
Misasi & Misasi PC
(802) 388-6307
11 Ct St
Middlebury, VT

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Tax Deduction Consulting: Margin Loan Interest

Margin Loan Interest Deduction

One area of confusion in the area of tax deductions comes from interest. Is there a margin loan interest deduction? How does a margin loan fit into the overall interest deduction situation?

A margin loan is a loan taken out mainly for the purposes of investment. It uses stocks and other investment securities as collateral. The main benefit of a margin loan is that it allows you to keep your investments intact while at the same time using them to provide additional funds for investment. There are some drawbacks to margin loans as well as the potential for good. Like all investments, there is risk that is almost always directly connected to the potential rate of return. However, is there a margin loan interest deduction?

Is the interest paid on the margin loan deductible as investment interest? Ultimately, the answer is going to lay in the use of the loan funds. The IRS allows interest as a deduction when the loan proceeds are used for the purpose of income producing investments. If the loan is for personal purposes, the interest is not deductible. Since the purpose of the margin loan, by definition almost, is to provide investment capital, any interest will be deductible.

Of course, you must make sure that the loan proceeds are used for income generating investments. If you take the proceeds from the loan and deposit it in a savings account until the time you are ready to make the investment, this is not considered a personal purpose. Since the funds are basically on hold until being invested, the interest on them might still be considered investment interest.

The amount of investment interest that you are allowed to deduct, including margin loan interest, can not exceed the total amount of your investment income in any given year. If you pay more investment interest than you have investment income, you can carry over the excess to subsequent years. The investment interest is calculated on IRS Form 4952, the Investment Int...

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