Everything is correct except the last statement, "if I file an itemized tax form then i can declare that $5,000 margin interest..."Actually, your statement is correct as worded, but, if you meant "I can deduct the margin interest" then the answer is "maybe."Margin interest is deductible if the loan was used for investment purposes (you can't take a margin loan to go on vacation, etc.), and to the extent that you have investment income (interest, dividends, short-term capital gains). If you have long-term capital gains, you can elect to have them taxed at ordinary rates in order to deduct your margin interest. Any margin interest which can't be deducted this year can be carried forward to next year.See Form 4952 and its instructions for all the details.Ira
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