An Investing Tax Break that Survived Under the New Tax Law
Forget about deducting management fees and tax-prep costs. But margin interest you still get.
Note: The editors of Kiplinger's Personal Finance magazine and the Kiplinger Tax Letter are answering questions about the new tax law from subscribers to our free Kiplinger Today daily email. See other reader Q&As about the new tax law, or submit your own question.
Question: Can you tell if investors can still deduct what we pay in margin interest?
Answer: Yes, interest on loans used to purchase investments that throw off taxable income remains deductible by those who itemize. As in the past, such interest is deductible up to the amount of taxable investment income reported (and, in this case, investment income does not include any capital gains or qualifying dividends that enjoy favorable tax treatment).
Although the write-off for investment interest survived the latest tax overhaul, the deduction of other investment expenses, such as investment management fees, did not. It was one of the miscellaneous itemized deductions subject to the 2% of AGI threshold that Congress killed.