Investment income vs Investment interest
What is investment income?
Investment income is the income you make from investment property. Investment income
Investment income does not include income from a passive activity (silent partner business
activities) or from rental real estate.
What is investment interest?
Investment interest is the interest paid on money borrowed to buy property held for investment.
Your investment interest expense deduction is limited to your net investment income.
Can I carryover investment interest in excess of investment income?
The excess of investment interest over your total investment income can be carried over to
future years. This means you can deduct the excess in future years.
How to deduct investment interest expenses?
You generally use Form 4952, Investment Interest Expense Deduction, to determine the amount
deductible. If your interest expense is less than your investment income and/or your interest is the only
investment expense you may not need to file the form 4952.