The Motley Fool Discussion Boards
Financial Planning / Tax Strategies
|Subject: Re: Margin Interest||Date: 4/25/1997 1:57 PM|
|Author: TMFTaxes||Number: 6 of 123019|
On Thu, 24 Apr 97 14:02:18 -0600, dmeredit wrote:
I will probably be incuring significant (in the hundreds of dollars) in margin interest this year. I did this as I wanted to get into certain stocks earlier in the year, in anticipation of my bonus (which has since paid off most of the interest).
My question is, if I make no short term capital gains this year, how can I get the tax advantage for the margin interest. Last year I made some ST capital gains and was able to offset some of these with the margin interest, but I understand that it is different for LT Capital Gains.
Also, if I made some ST capital loses, can these be used to offset against my personal income or only against other short term capital gains.
Thanks for any help.>>
Understand that Investment Interest is an animal in and of itself. It has it's own separate rules and restrictions. To learn more about Investment Interest, you'll what to check out IRS Form 4952 and instructions, and IRS Publication 550. That will provide you with significant information that will be useful to you and your tax planning. Remember also that investment interest is treated as an itemized deduction, so if you are not able to itemize your deductions, your Investment Interest may be of very little value to you.
Now then, you make a reference to long term capital gains. You should know that for tax years after 192, net investment income does NOT include LTCG. An election is available to treat all or part of the net LTCG as investment income, provided that you reduce the amount of net LTCG eligible for the 28% maximum capital gains rate by the same amount. This election is made by completing Form 4952. So, as you can imagine, this election becomes significant if your "normal" tax rate is greater than 28%. But if your "normal" tax rate is 28% or less, the importance of the maximum tax for LTCGs becomes moot, and you will generally make the election to t