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Investment Interest Expenses

Interest is the amount you pay when you borrow money. Some interest can be claimed on your tax return as a deduction or as a credit. Investment Interest expenses are any amount of interest paid on loan proceeds used to purchase investment securities.

Investment interest expenses include margin interest from securities in brokerage accounts and interest on loans used to buy properties held for investment. The investment property you purchased with the proceeds should generally produce income such as capital gains/losses, interest, dividends and other distributions such as mutual fund distributions.

The amount of investment interest expense you can deduct is limited to your net investment income. Interest paid on money borrowed for personal use such as cars or credit cards is not tax deductible.

See IRS Publication 550 for more information. 

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