What is Investment interest expense?
In short
Interest on money borrowed to buy investment property is deductible as an itemized deduction, but only up to net investment income. The excess carries forward indefinitely.
Key takeaways
- Qualified dividends and long-term capital gains count as investment income only if the taxpayer elects to have them taxed at ordinary rates.
- Interest used to buy tax-exempt bonds isn't deductible at all.
- Interest relating to passive activities follows the passive loss rules instead.
Where it's tested
REG: Individual Taxation: Adjustments & Deductions — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Investment interest expense is deductible by an individual only to the extent of: