margin interest carry over without itemizing deduction?

[datou]

Hi, if I opt for the standard deduction instead of itemizing deductions, am I able to carry forward my margin interest expense to the next year if my net investment income for the current year is negative? Can margin interest expenses be treated similarly to capital losses, which can be carried forward with the standard deduction?

[JulieS · Accepted solution]

Yes, if you complete Form 4952 and your deduction for margin interest is disallowed, you can carry the disallowed amount forward to next year. 

You don't have to itemize to carry the amount forward, but only the amount that is disallowed carries forward. 

For example, if your margin interest is $1000, but you are only allowed $500 for the current year, you can carryforward $500 to next year. If you don't itemize this year, that does not change the disallowed amount that can be carried forward, it is still $500, whether or not you itemize. 

[hiteq]

To follow on to this question, if I have an Investment Expense deduction due to margin interest - line 8 of 4952 - but I don't use it as the standard deduction is greater, can I carry that amount of unused Investment Expense deduction to the following year?

I suspect the answer would be no, but have never encountered this until this year.

Thanks!

Tom

[PatriciaV]

Yes, unused Investment Interest Expense carries forward automatically to future years, as long as you file Schedule A for Itemized Deductions and Form 4952 to report the carryover in the year of the excess (even if you end up taking the Standard Deduction). The 2025 carryover amount appears on Form 4952 Line 7.

[hiteq]

Thank you for your reply..

Just to clarify my situation - 

- In 2024 I had a investment interest deduction available of $100 - 4952 line 8, and schedule A line 9 both showed $100 of investment interest.  However my total itemized deduction was less than my standard deduction, so I took the standard deduction.

- My question is - can I carryforward that $100 of investment interest to my 2025 4952 line 2?  That line is labeled as the amount from 2024 4952 line 7, which shows $0.

Wasn't sure this was clear in my previous question, but had not encountered this situation before so wanted to double check.  

Sometimes the carryforward rules are a little tricky I believe.  I could make the argument both ways on this one 🙂

Thanks again!

Tom