PriorTax | Investment Interest Expense Deduction - Form 4952

Investment Interest Expense Deduction - Form 4952

You must file Form 4952 to claim the investment interest expense deduction and determine how much investment interest expense you can carry forward to future years.

However, you do not have to file Form 4952 if

  • Your investment interest expense is less than your investment income from interest and ordinary dividends minus qualified dividends.
  • You do not have any other deductible investment expenses.
  • You have no carryover of disallowed investment interest expense from the previous year.


  • Note, the maximum investment interest expense deduction you can take is equal to your net investment income, which is made up of interest, dividends, annuities, royalties, and net gains from dispositions of investment property.

    Long-term capital gains are not included in investment income for the purpose of calculating the deduction, but short-tern capital gains are included.

    To increase the amount of your deduction you can choose to report part or all of your long-term capital gains as short-term capital gains. In doing so you forfeit the lower tax rate on long-term capital gains, but if your deduction is large enough it could be beneficial.