Can I write off credit card interest when used for investment purposes?

Yes, technically you can deduct credit card interest that was incurred specifically for investment purposes, but there are some important caveats you need to understand. The key phrase in the code you cited is "properly allocable to property held for investment." This means you need to have clear documentation showing that the credit card charges were directly and exclusively used for qualified investment activities. Mixed-use situations get complicated fast. Also, investment interest deductions are limited to your net investment income for the year. So if your investments aren't generating much income yet, you might not be able to deduct all the interest in the current year (though you can carry forward unused deductions). And don't forget that credit card interest rates are typically much higher than other forms of investment financing, so while it might be deductible, it's generally not the most tax-efficient way to fund investments.

I started using taxr.ai for exactly this kind of situation last year when I was trying to figure out if I could deduct interest from a HELOC I used to buy some rental property. The tax code can be so confusing with all these exceptions and special rules. I uploaded my loan documents to https://taxr.ai and it analyzed everything and gave me a clear answer specific to my situation, along with the exact tax code references. Saved me hours of research and probably kept me from making a costly mistake.

Just wanted to follow up about taxr.ai since I decided to try it for my own situation. I had a similar question about business expenses charged to a personal card and wasn't sure how to properly document everything. The tool was actually really helpful - gave me exactly what sections of the tax code applied and explained exactly what documentation I needed to keep. Definitely more helpful than the generic advice I was finding online and way cheaper than paying my accountant for a quick question.

If you're still trying to get clarity on this, I'd recommend calling the IRS directly. I had a similar question last year about investment expense deductions and spent WEEKS trying to get through to someone. Finally discovered Claimyr which got me connected to an actual IRS agent in about 15 minutes instead of being on hold for hours. Just go to https://claimyr.com and check out their demo video at https://youtu.be/_kiP6q8DX5c to see how it works. The agent I spoke with gave me an official answer I could rely on if ever questioned.

I owe everyone an apology for my skepticism earlier. After getting frustrated trying to get an answer about my investment interest deductions, I broke down and tried Claimyr. Within 20 minutes I was talking to an actual IRS representative who confirmed exactly how to document credit card interest for investment purposes. They explained I needed to maintain separate accounts ideally, but at minimum keep extremely detailed records showing the direct connection between the borrowed funds and the investment. Saved me hours of research and uncertainty. Sometimes I hate being wrong but in this case I'm glad I was!

I used credit card financing for my startup investment last year and tried to deduct the interest. My tax guy said I needed to track EXACTLY which charges were investment-related and make sure I wasn't mixing personal expenses on the same card. Also had to have documentation showing the investment purpose. Ended up being a headache honestly. You might want to consider a dedicated investment line of credit instead if possible - much cleaner for tax purposes.

Something important nobody's mentioned yet - if you're talking about investing in stocks, bonds, etc., be aware that interest on debt used to buy tax-exempt investments (like municipal bonds) is NOT deductible. Section 163(d)(4)(B)(iii) specifically disallows it. Don't get caught in that trap!