Form 4952, Investment Interest Expense Deduction
Form 4952 figures how much of the interest you paid on money borrowed to invest you can deduct this year, and how much carries forward. Fill in the official IRS PDF below and download it.
This is the genuine IRS PDF, unmodified. Source: IRS official page.
What is 4952?
If you borrow money to buy taxable investments, such as a margin loan from your broker, the interest is investment interest expense. The deduction is limited to your net investment income for the year, and Form 4952 works through that limit. Any interest you cannot deduct this year carries forward to future years.
The form also handles an optional election to treat qualified dividends and net capital gain as investment income, which can raise this year’s deduction but gives up the lower tax rate on those amounts. The allowed deduction is claimed as an itemized deduction on Schedule A.
Who files 4952?
- Investors deducting margin loan interest or other interest on money borrowed to invest
- Taxpayers with investment interest carried forward from an earlier year
- Filers electing to count qualified dividends or capital gains as investment income to enlarge the deduction
- Partners or S corporation shareholders passed through investment interest expense
How to fill out 4952
- Enter your total investment interest expense paid this year on line 1, plus any carryforward from last year on line 2.
- Work through Part II to figure your gross and net investment income, including any election amounts for qualified dividends and capital gain.
- Complete Part III to compare interest expense against net investment income: the smaller number is this year’s deduction.
- Note the disallowed amount that carries forward to next year’s Form 4952.
- Download the PDF, carry the deduction to Schedule A, and attach Form 4952 to your return.
Quick fill 4952 on this page
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Frequently asked questions
Do I always need Form 4952 to deduct investment interest?
Usually yes, but the instructions allow you to skip it in simple cases, generally when your investment interest is not more than your investment income and you have no carryforwards or special elections. Check the current instructions at irs.gov.
Should I elect to include capital gains as investment income?
The election raises your deductible limit but taxes the elected gains and qualified dividends at ordinary rates instead of the lower capital gain rate. It helps some taxpayers with large interest expense, but it is worth comparing both ways before choosing.
What happens to interest I cannot deduct this year?
It is not lost. The disallowed amount carries forward indefinitely and goes on line 2 of next year’s Form 4952, deductible whenever you have enough net investment income.