Federal Investment Interest Expense Deduction
Extracted from PDF file 2020-federal-form-4952.pdf, last modified November 2020
Investment Interest Expense DeductionForm 4952 OMB No. 1545-0191 Investment Interest Expense Deduction Department of the Treasury Internal Revenue Service (99) ▶ 2020 Go to www.irs.gov/Form4952 for the latest information. ▶ Attach to your tax return. Attachment Sequence No. 51 Identifying number Name(s) shown on return Part I 1 2 3 Total Investment Interest Expense Investment interest expense paid or accrued in 2020 (see instructions) Disallowed investment interest expense from 2019 Form 4952, line 7 . Total investment interest expense. Add lines 1 and 2 . . . . . . Part II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 3 Net Investment Income 4a Gross income from property held for investment (excluding any net gain from the disposition of property held for investment) . . . . . . . . . . 4a b Qualified dividends included on line 4a . . . . . . . . . . . . . 4b c Subtract line 4b from line 4a . . . . . . . . . . . . . . . . . . . . . . . . d Net gain from the disposition of property held for investment . . . . . . 4d e Enter the smaller of line 4d or your net capital gain from the disposition of property held for investment. See instructions . . . . . . . . . . 4e f Subtract line 4e from line 4d . . . . . . . . . . . . . . . . . . . . . . . . g Enter the amount from lines 4b and 4e that you elect to include in investment income. See instructions h Investment income. Add lines 4c, 4f, and 4g . . . . . . . . . . . . . . . . . . . 5 Investment expenses (see instructions) . . . . . . . . . . . . . . . . . . . . . 6 Net investment income. Subtract line 5 from line 4h. If zero or less, enter -0- . . . . . . . . Part III 7 8 4c 4f 4g 4h 5 6 Investment Interest Expense Deduction Disallowed investment interest expense to be carried forward to 2021. Subtract line 6 from line 3. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . Investment interest expense deduction. Enter the smaller of line 3 or line 6. See instructions . For Paperwork Reduction Act Notice, see page 4. Cat. No. 13177Y . . 7 8 Form 4952 (2020) THIS PAGE INTENTIONALLY LEFT BLANK Form 4952 (2020) Page 3 Reporting on Schedule D Tax Worksheet. Use the Schedule D Tax Worksheet in the instructions for Schedule D to figure the amount to enter on Form 1040 or 1040-SR, line 16, if you have to file Form 4952. includes property that produces gain or loss, not derived in the ordinary course of a trade or business, from the disposition of property that produces these types of income or is held for investment. However, it doesn’t include an interest in a passive activity. Exception. A working interest in an oil or gas property that you held directly or through an entity that didn’t limit your liability is property held for investment, but only if you didn’t materially participate in the activity. Future Developments Part II—Net Investment Income Section references are to the Internal Revenue Code unless otherwise noted. What’s New For the latest information about developments related to Form 4952 and its instructions, such as legislation enacted after they were published, go to www.irs.gov/Form4952. General Instructions Purpose of Form Use Form 4952 to figure the amount of investment interest expense you can deduct for 2020 and the amount you can carry forward to future years. Your investment interest expense deduction is limited to your net investment income. For more information, see Pub. 550, Investment Income and Expenses. Who Must File If you are an individual, estate, or a trust, you must file Form 4952 to claim a deduction for your investment interest expense. Exception. You don’t have to file Form 4952 if all of the following apply. • Your investment income from interest and ordinary dividends minus any qualified dividends is more than your investment interest expense. • You don’t have any other deductible investment expenses. • You don’t have any carryover of disallowed investment interest expense from 2019. Allocation of Interest Expense If you paid or accrued interest on a loan and used the loan proceeds for more than one purpose, you may have to allocate the interest. This is necessary because different rules apply to investment interest, personal interest, trade or business interest, home mortgage interest, and passive activity interest. See Pub. 535, Business Expenses. Specific Instructions Part I—Total Investment Interest Expense Line 1 Enter the investment interest expense paid or accrued during the tax year, regardless of when you incurred the indebtedness. Investment interest expense is interest paid or accrued on a loan or part of a loan that is allocable to property held for investment (as defined later). Include investment interest expense reported to you on Schedule K-1 from a partnership or an S corporation. Include amortization of bond premium on taxable bonds purchased after October 22, 1986, but before January 1, 1988, unless you elected to offset amortizable bond premium against the interest payments on the bond. A taxable bond is a bond on which the interest is includible in gross income. Investment interest expense doesn’t include any of the following. • Personal interest under section 163(h), including qualified residence interest. • Interest expense that is properly allocable to a passive activity. Generally, a passive activity is any trade or business activity in which you don’t materially participate and any rental activity. See the Instructions for Form 8582, Passive Activity Loss Limitations, for details. • Any interest expense that is capitalized, such as construction interest subject to section 263A. • Interest expense related to tax-exempt interest income under section 265. • Interest expense, disallowed under section 264, on indebtedness with respect to life insurance, endowment, or annuity contracts issued after June 8, 1997, even if the proceeds were used to purchase any property held for investment. Property held for investment. Property held for investment includes property that produces income, not derived in the ordinary course of a trade or business, from interest, dividends, annuities, or royalties. It also Line 4a Gross income from property held for investment includes income, unless derived in the ordinary course of a trade or business, from interest, ordinary dividends (except Alaska Permanent Fund dividends), annuities, and royalties. Include investment income reported to you on Schedule K-1 from a partnership or an S corporation. Also include net investment income from an estate or a trust. Also include on line 4a (or 4d, if applicable) net passive income from a passive activity of a publicly traded partnership (as defined in section 469(k)(2)). See Regulations sections 1.469-10 and 1.7704-1 (including the transition rule of section 1.7704-1(l)) for details. Net income from certain passive activities, such as rental of substantially nondepreciable property, may have to be recharacterized and included on line 4a. For details, see Pub. 925, Passive Activity and At-Risk Rules, or Regulations section 1.469-2(f)(10). If you are filing Form 8814, Parents’ Election To Report Child’s Interest and Dividends, part or all of your child’s income may be included on line 4a. See the instructions for Form 8814 for details. Don’t include on line 4a any net gain from the disposition of property held for investment. Instead, enter it on line 4d. ! ▲ CAUTION Line 4b Enter the portion of ordinary dividends included on line 4a that are qualified dividends. For the definition of qualified dividends, see the instructions for Forms 1040 and 1040-SR, line 3a (or Form 1041, line 2b). Line 4d Net gain from the disposition of property held for investment is the excess, if any, of your total gains over your total losses from the disposition of property held for investment. When figuring this amount, include capital gain distributions from mutual funds and capital loss carryovers. Line 4e Net capital gain from the disposition of property held for investment is the excess, if any, of your net long-term capital gain over your net shortterm capital loss from the disposition of property held for investment. Capital gain distributions from mutual funds are treated as long-term capital gains. Note: If line 4e is more than zero and you enter an amount on line 4g, see the Note in the line 4g instructions next. Line 4g In general, qualified dividends and net capital gain from the disposition of property held for investment are excluded from investment income. But you can elect to include part or all of these amounts in investment income. The qualified dividends and net capital gain that you elect to include in investment income on line 4g aren’t eligible to be taxed at the qualified dividends or capital gains tax rates. CAUTION You should consider the tax effect of using the qualified dividends and capital gains tax rates before making this election. Once made, the election can be revoked only with IRS consent. To make the election, enter on line 4g the amount you elect to include in investment income (don’t enter more than the sum of lines 4b and 4e). Also enter this amount on whichever of the following applies. • The Schedule D Tax Worksheet, line 3. • Schedule D (Form 1041), line 25. • The Qualified Dividends Tax Worksheet, line 3, in the Instructions for Form 1041. ! ▲ Form 4952 (2020) Don’t reduce the amount of qualified dividends on Form 1040 or 1040-SR, line 3a (or Form 1041, line 2b(2)), by any part of the amount on line 4g. Note: The amount on line 4g is generally treated as being attributable first to net capital gain from property held for investment (line 4e), and then to qualified dividends (line 4b). This treatment results in the least tax being figured for Form 1040 or 1040-SR, line 16 (or Form 1041, Schedule G, line 1a). However, you can treat less of the amount on line 4e as attributable to line 4g and more to line 4b. You may want to do this if you are filing Form 1116, Foreign Tax Credit, as your tax after credits may be lower in certain cases. To do so, enter on the dotted line next to line 4e “Elec.” and the part of line 4e that you elect to treat as being attributable to line 4g (don’t enter less than the excess of line 4g over line 4b). You will use this smaller amount instead of the amount on line 4e when figuring your tax. Generally, you must make this election on a timely filed return, including extensions. However, if you timely filed your return without making the election, you can make the election on an amended return filed within 6 months of the due date of your return (excluding extensions). Write “Filed pursuant to section 301.9100-2” on the amended return and file it at the same place you filed the original return. Line 5 Investment expenses are your allowed deductions, other than interest expense, directly connected with the production of investment income. For example, depreciation or depletion allowed on assets that produce investment income is an investment expense. Include investment expenses incurred directly by you or reported to you on Schedule K-1 from a partnership, or by an S corporation, but only if you are allowed a deduction on your return for the expense. Investment expenses don’t include any deductions used in determining your income or loss from a passive activity. Don’t include any miscellaneous itemized deductions, which aren’t allowed deductions in tax years beginning after December 31, 2017, and before January 1, 2026. ! ▲ CAUTION Part III—Investment Interest Expense Deduction Line 8 Individuals. Generally, enter the amount from line 8 (excluding any amount included on Form 6198, line 4—see later) on Schedule A (Form 1040 or 1040-SR), line 9, even if all or part of it is attributable to a partnership or an S corporation. However, if any part of the interest Page 4 expense is attributable to royalties, enter that part on Schedule E (Form 1040). Also, if any part of the interest is attributable to a trade or business that isn’t a passive activity, enter that part on the schedule where you report other expenses for that trade or business. Estates and trusts. Enter the amount from line 8 (excluding any amount included on Form 6198, line 4—see below) on Form 1041, line 10. However, if any part of the interest is attributable to a trade or business that isn’t a passive activity, enter that part on the schedule where you report other expenses for that trade or business. Form 6198. If any of your deductible investment interest expense is attributable to an activity for which you aren’t at risk, you must also use Form 6198, At-Risk Limitations, to figure your deductible investment interest expense. Include the part attributable to the at-risk activity on Form 6198, line 4. Alternative minimum tax (AMT). Deductible interest expense may be an adjustment for the AMT. For details, see Form 6251, Alternative Minimum Tax—Individuals, or Schedule I (Form 1041). Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the United States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax. You aren’t required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by section 6103. The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden for individual taxpayers filing this form is approved under OMB control number 1545-0074 and is included in the estimates shown in the instructions for their individual income tax return. The estimated burden for all other taxpayers who file this form is: Recordkeeping, 39 min.; Learning about the law or the form, 12 min.; Preparing the form, 24 min.; and Copying, assembling, and sending the form to the IRS, 13 min. If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be happy to hear from you. See the instructions for the tax return with which this form is filed.
2020 Form 4952
More about the Federal Form 4952 Individual Income Tax TY 2020
We last updated the Investment Interest Expense Deduction in January 2021, so this is the latest version of Form 4952, fully updated for tax year 2020. You can download or print current or past-year PDFs of Form 4952 directly from TaxFormFinder. You can print other Federal tax forms here.
Other Federal Individual Income Tax Forms:
|Form Code||Form Name|
|1040 (Schedule B)||Interest and Ordinary Dividends|
|Form 8822||IRS Change of Address|
|Form 1040||U.S. Individual Income Tax Return|
|1040 (Schedule R)||Credit for the Elderly or the Disabled|
|W-4V||Voluntary Withholding Request|
The Internal Revenue Service usually releases income tax forms for the current tax year between October and January, although changes to some forms can come even later. We last updated Federal Form 4952 from the Internal Revenue Service in January 2021.
About the Individual Income Tax
The IRS and most states collect a personal income tax, which is paid throughout the year via tax withholding or estimated income tax payments.
Most taxpayers are required to file a yearly income tax return in April to both the Internal Revenue Service and their state's revenue department, which will result in either a tax refund of excess withheld income or a tax payment if the withholding does not cover the taxpayer's entire liability. Every taxpayer's situation is different - please consult a CPA or licensed tax preparer to ensure that you are filing the correct tax forms!
Historical Past-Year Versions of Federal Form 4952
We have a total of ten past-year versions of Form 4952 in the TaxFormFinder archives, including for the previous tax year. Download past year versions of this tax form as PDFs here:
2011 Form 4952
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