Should capital gains / qualified dividends be elected to be treated as investment income in order for investment interest can be deducted in the current year rather than carried over? This question popped up during TurboTax asking me if I wanted to make this election. Tax bracket is 22% with capital gains at 15%. I assume it is better to carry over the investment interest and deduct against future investment income rather than use up 15% tax income . . . assuming I can generate taxable investment income in the future. Is my thinking correct?
I think you are missing the advantage ... if you claim some 15% income at the higher 22% bracket you can then deduct the same amount on the Sch A so the effective tax rate becomes 0%. Review the return both ways and see which you prefer then make your choice.
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Just one opinion, but I would say this is a judgment call and only you know whether you have, or can, generate investment income.
Also, the tax year is two-thirds over at this point so you should have a pretty good handle on 2019. Baed upon your facts, I would personally take it this tax year.
it's a personal decision. tax laws change. (with recent law changes it was better for some taxpayers not to itemize) how long to use up the carryforward. next year or 10 years? (ie money has time value)
When I use a with and without scenario, my tax savings for each $1 of qualified div / cap gain converted to investment income ranges from a low of composite 7% for small dollar conversion and composite 12% for high dollar (full amount) conversion . . . in return for eliminating some or all of my carryforward of investment interest expense by offsetting it against qual div / cap gain.