Can margin loan interest be deductible?

September 26, 2008

From:  Matt
Date:  Wed, 20 Feb 2008

Hello Mr. Gray,

Does using a margin loan to make a down payment on a house qualify as a "taxable investment", qualifying the annual payments of interest for the margin loan to be tax deductible as investment interest expense?

Thanks for any insight,
Matt

Answer

Date:  09 Mar 2008

Hello Matt,

Assuming the house is a personal principal residence, margin loans to purchase the home would be a personal loan, and the related interest is not deductible. If the house is a rental, the related interest is deductible on Schedule E as a deduction against rental income and losses may be subject to the passive activity loss limitations.

Good luck!
Mike Gray

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