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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.

Liberty Tax Service
(802) 865-2829
1197 Williston Rd
South Burlington, VT
 
Misasi & Misasi PC
(802) 388-6307
11 Ct St
Middlebury, VT

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H&R Block Inside St Albans Commons
(802) 524-3140
178 SWANTON RD
SAINT ALBANS, VT

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Danaher Attig & Plante PLC
(802) 383-0399
150 Kennedy Drive
South Burlington, VT
 
Harton & Associates Robert & Jeff
(802) 878-4458
57 River Rd
Essex Junction, VT
 
H&R Block
(802) 388-3190
260 Court ST
Middlebury, VT
 
Champlain Tax Service
(802) 863-1040
20 Kimball Ave
South Burlington, VT
 
H&R Block
(802) 479-9100
TWIN CENTER PLAZA SHOPPING CENTER 1284 RTE 302
BERLIN, VT

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Lachance Susan CPA PC
(802) 878-7677
45 Logwood Cir
Essex Junction, VT
 
Associates In Accounting
(802) 878-9619
6 Pinecrest Dr
Essex Junction, 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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