What is investment & interest expense?

Use Form 4952 to figure the amount of investment interest expense you can deduct for the tax year and the amount you can carry forward to future years. Your investment interest expense deduction is limited to your net investment income.For more information, see Pub. 550, Investment Income and Expenses.

If you are an individual, estate, or a trust, you must file Form 4952 to claim a deduction for your investment interest expense.
Exception. You do not have to file Form 4952 if all of the following apply.

• Your investment income from interest and ordinary dividends minus any qualified dividends is more than your investment interest expense.
• You do not have any other deductible investment expenses.
• You do not have any carryover of disallowed investment interest expense from a prior year.

If you paid or accrued interest on a loan and used the loan proceeds for more than one purpose, you may have to allocate the interest. This is necessary because different rules apply to investment interest, personal interest, trade or business interest, home mortgage interest, and passive activity interest. See Pub. 535, Business Expenses.

For more information, see Form 4952 and instructions.