Not on Schedule D.
If you borrow money to purchase an investment, you may qualify for a tax break on Form 4952.
The IRS allows certain taxpayers to take a tax deduction for the interest expense on some loans. It can get complicated and only certain types of investment interest qualify.
The most common is a margin loan at a brokerage. If you "go on margin" with your stockbroker, it means you're borrowing money from the firm to buy stocks or other investments. The interest you pay on that margin loan is qualifying investment interest.
You can only take a deduction to the extent of 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.
Not all interest you pay on investment loans is allowed, including:
• qualified home mortgage interest
• interest used to generate tax-exempt income, such as if you go on margin to buy a municipal tax-free bond
• option straddles, which are an advanced investment strategy not applicable to most investors
• interest taken into account when computing the gain or loss on any passive activities
Line 1 on the 4952 worksheet is interest carried from a Schedule K-1 while line 3 of the worksheet contains other Investment interest expenses that you are reporting from other sources (i.e., a broker statement). Actual Form 4952 line numbers differ.
You can edit your interest by following these steps:
1) Once in your Turbo Tax Software go to "Federal Taxes"
2) Select "Deductions & Credits"
3) Select "Ill choose what I work on" or "explore on my own"
4) Scroll down to "Retirement and Investments" section and update or start "Investment Interest Expenses"
OR
You can delete the form 4952 and its worksheet, if needed:
- Open your return in TurboTax.
(To do this, sign in to TurboTax, and click the orange Take me to my return button.)
- In the upper right corner, click My Account > Tools.
- In the pop-up window, select Delete a form.
- Click Delete next to the form/schedule/worksheet and follow the onscreen instructions.
