As tax season approaches, many taxpayers are looking for ways to reduce their taxable income and maximize their deductions. It's rare for taxpayers to deduct medical expenses, self-employment and investment income, but not the standard or itemized deductions. However, there is one deduction that investors should be aware of – the investment interest expense deduction.
What is the Investment Interest Expense Deduction? The investment interest expense deduction is the interest paid on money borrowed to purchase taxable investments, such as stocks, bonds, and mutual funds. Taxpayers can claim this deduction on their tax return, which reduces their taxable income.
How to Qualify for the Investment Interest Expense Deduction To qualify for the investment interest expense deduction, taxpayers must meet certain criteria. First, the investment must be considered taxable, meaning it generates income that is subject to taxation. Second, the interest must be paid on money borrowed to purchase the investment. Third, the taxpayer must itemize their deductions on their tax return.