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The answer to your questions is , I think, it depends. I have margin interest for the first time myself this year, but I think I have figured it out.

On Schedule A for Itemizing Deductions, there is a line for Investment Interest and a note to fill out form 4952. Basically what this says is that you can only deduct Investment Interest to the extent that you have Investment Income.

In my case, I paid $70.10 in margin interest. I received only $20 in interest income from a savings account.

So the bottom line, is that I can only deduct $20 from this year's taxes, but can carry over the $50.10 to perhaps take next year.

There can be other complications as well. So check out the instructions for Schedule A and Form 4952 for more details.
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