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What is Investment Interest Expense?

IIE is deductible from taxes, and is usually used to deduct the interest paid on a margin loan used to buy taxable securities, when there is a gain to offset.

Investment interest expense is the term for interest which has been paid in order to hold an investment position. It comes into play when filing taxes. An individual can list interest expenses on a Form 1040. The most common place to incur an interest expense when investing is through the use of margin in an investment account.

Margin loans allow investors to hold more, or larger, positions with the same amount of capital, but they will be charged interest as long as the loan is outstanding. The same might go for short positions, which might also require margin (as margin itself describes the cash or equity balance which serves as collateral for the loan).

At the end of the year, if there are gains to report but interest was paid while waiting for the gains to materialize, the investor can write off the interest payments, similar to deductions available on mortgage loan interest.

Real estate investment properties are also eligible for investment interest expense deductions.

What is Mortgage Interest Deduction?
What is Earnings Before Interest Depreciation and Amortization (EBIDA)?

Keywords: real estate, short selling, margin, loans, tax deductible, cash equivalents, investment accounts, Form 1040, investment property,