Question

Line of credit on brokerage account

Forum|Forum|4 years ago
June 10, 2021
2 replies
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I am planning to take the line of credit against the stocks I have in my brokerage account.

This is because I cannot sell my stocks at their current prices as it will end up in huge losses.

The line of credit helps me to borrow money at lower rate against my stocks and fulfill my financial needs.

Will the interest I pay for the money I borrow from my brokerage account for the line of credit eligible for deducting the taxes?

Deduction

Critter-3

Nope ... personal interest is not deductible. This would be like taking a cash advance on your credit card.

M

Mike9241

borrowings from your brokerage account secured by the securities will be investment interest. investment interest is reported on form 4952 (schedule a) but is only deductible to extent of investment income (interest and non-qualified dividends) you can elect to have qualified dividends and long-term capital gains to be like nonqualified income applied. any excess investment interest expense can be carried forward

fanfare

Employee

For some reason Jeff Bezos's interest expense of $43 million is deductible but yours is not.

Critter-3

I am sure he has this "loan" buried in a corporation of some kind. People like this never have "personal" loans they keep everything in a business at arm's length. Remember the rich have many accountants and lawyers structuring situations with many layers ... Trump is the prime example.

Now for your situation ... personal interest has not been deductible for decades. And MARGIN interest "may" be deductible on the 4952 but with restrictions (of which a big player would be able to make use of if structured properly). AND maybe you could use the tracing rules but ONLY IF you could make a case in an IRS audit that supports that the interest was solely for the purpose of investing in a business property.