Deducting Interest Expense: The Party's Over (For Some)

Document Type



Published by American Institute of Certified Public Accountants in Journal of Accountancy, volume 177, Issue 5, Pages 29-30.

Bryant University users may access this article here.


income tax deductions;capital gains


American Institute of Certified Public Accountants

Publication Source

Journal of Accountancy


The article discusses investment interest expense tax deduction. Net investment income is the excess of a taxpayer's investment income over investment expenses. Investment income includes dividends, interest, annuities and royalties. Investment expenses are those deductible expenses directly connected with the production of investment income, such as safe-deposit box rentals, financial adviser fees and subscriptions to financial journals. Investment expenses, however, don't include interest paid on a loan. In deciding whether to make this special election, taxpayers with marginal rates above 28% must compare the cost of deferring the interest deduction to a future year with the cost of losing the lower 28% tax on capital gains. Taxpayers whose marginal rate is 28% or lower have nothing to lose by rnaking the election and may party on.