what is my investment interest deduction?

Question

I paid 10,000 in interest (5,000 related to tax exempt investment) to the bank for loans to purchase inestment. Also i have the following

1. Capital gains from sale of stocks 5000
2. Dividend income from stocks 3000
3. Interest from saving account 10000

Answer 1

Interest on loans that are used to purchase investments that generate taxable income is deductible up to the amount of taxable income generated. From what you posted here, your deductible interest would be $5,000, assuming of course that it was for loans that purchased assets that generated at least $5,000 in taxable income.

Answer 2

You deduct $5,000 of investment expense on Form 1040 Schedule A Line 13.

Answer 3

the part related to the tax exempt investments is NOT deductible at all.

you need the form for investment interest expense [the irs.gov website is searchable]

in short and absent an other complicating factors like AMT, since your interest income exceeds your remaining 5000 interest expense, you should be able to deduct all 5000 of it.

GL

Answer 4

http://investments-tawat.blogspot.com/