My investment expense deduction isn't including all ordinary dividends, gains and interest

[steiny1227]

I just got my Schwab 1099 forms so went to file my investment expense deduction and the numbers are WAY off from what they should be. I have the following:

1) $4K of interest

2) $3K of net gains ($10K ST cap gains offset by $7K of LT cap losses)

3) A total of what I think is $23K in ordinary dividends, etc. that should count in this number, but there are so many different types this is where things get confusing:

   -$10K ordinary dividends

   -$1K in unrecaptured 1250 gains

   -$2K in section 897 gains

   -$9K in section 199A dividends

   -$2K in substitute payments in lieu of dividends

Now, I'm sure not all these are included in the investment expense deduction, but my total deduction only came out to $19K so it seems only a couple of these were included. Can anyone provided guidance as I can't find anything online to determine which of these types should be included in my deduction?

Thanks,
Mike

[Bsch4477]

Schwab explains that here. 

https://workplace.schwab.com/content/investment-expenses-whats-tax-deductible

[steiny1227]

Thanks but I have already seen that article…it doesn’t go nearly to the level of depth I’m looking for. All those things I listed are taxed at marginal (not qualified) tax rates but it’s unclear to me what is or is not included in the net investment income used to determine the amount of investment expense that can be deducted.

[Bsch4477]

Investment expenses are not deductible as the article points out. Are you conflating investment expenses with investment interest deduction?

[steiny1227]

Yes, I'm referring to investment interest expenses (i.e. margin loans in my case). But it all comes down to what is included in net investment income as my margin interest exceeds my investment income so I'm limited to how much is included in that net investment income number. 

[steiny1227 · Accepted solution]

I don't know if this will help others, but I'll reply to my own question after doing a couple hours worth of research.

So basically, the ordinary dividends of $10K below do include the Section 199A dividends + some others that are not categorized. The other categories below are either included as LT capital gains (unrecaptured 1250 gains, section 897 gains) or income (substitute payments in lieu of dividends). And because those items are part of LT cap gains, my net capital gain actually comes out to ~$6K vs. the $3K I calculated below.

That gives me total net investment income of $10K (ordinary dividends) + $5-6K (net capital gain) + $4K interest = ~$19-20K for my investment expense deduction, so the numbers do add up!

Wow, why do taxes have to be so complex! 🙂