margin interest carry over without itemizing deduction?

Forum|Forum|3 years ago
April 17, 2023
1 reply
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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?

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Best answer by JulieS

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.

JulieSAnswer

Level 15

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.

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hiteq

Level 2

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

DaveF1006

Level 15

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

No. You only get a carryover if your interest was disallowed because it exceeded your net investment income. In this case, you didn’t lose the $100 due to an income limit—you just chose the Standard Deduction because it gave you a bigger benefit.

Since the deduction wasn’t disallowed on Form 4952, you can’t carry it forward to next year. It just isn’t available anymore.

@hiteq

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