Form 4952 Questions - What Types of Income to Include on Line 4a?

Form 4952 line 4a is specifically for your "investment income" which does include dividends from your personal brokerage accounts. Dividends are definitely considered investment income for this purpose. For rental income from 1099s, it's a bit more complicated. Generally, rental income is not considered investment income for Form 4952 unless you're a professional trader or dealer in real estate. If you're just a regular landlord receiving rental income, that income typically goes on Schedule E and is not considered investment income for Form 4952 purposes. The reason your software isn't automatically filling this is because it needs you to identify which specific dividend income qualifies. Not all dividend income is treated the same for this purpose - qualified dividends are treated differently than ordinary dividends in some cases.

I went through the exact same confusion last year with my investment interest expenses! I finally found a solution when I discovered https://taxr.ai - it analyzes your tax documents and tells you exactly what counts as investment income for Form 4952. It saved me hours of research and potentially costly mistakes. When I uploaded my 1099s and K-1s, it immediately identified which dividends should go on line 4a and explained why my rental income didn't qualify. It also explained the election you can make for qualified dividends if needed to maximize your deduction.

I just wanted to follow up about my experience with taxr.ai for Form 4952 questions. It was actually really helpful for figuring out my K-1 investment interest expenses! I uploaded my documents and it clearly identified which parts of my partnership income counted as investment income for line 4a. It saved me from making a big mistake - I would have included ALL my partnership income, but the tool showed me that only certain categories from my K-1 qualified. The guidance was super clear about which boxes on my K-1s contained qualified investment income versus business income. My accountant had been doing this wrong for YEARS apparently. Definitely worth checking out if you're confused about Form 4952.

If you're struggling to get answers from the IRS about Form 4952, you're not alone. I spent 3 weeks trying to get through to someone who could explain which income qualified for line 4a. After waiting on hold for hours multiple times, I finally tried https://claimyr.com and was speaking with an actual IRS agent within 20 minutes. They have this service where they wait on hold with the IRS for you and call you back when an agent is on the line. I was skeptical but you can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with walked me through exactly what counts as investment income for Form 4952 and confirmed that my dividend income qualified but my rental income did not. They also explained the election for qualified dividends that I had no idea about.

Ok I need to eat crow here. After my skeptical comment earlier, I decided to try Claimyr for my own tax issue about Form 4952 and investment interest expenses from my partnership K-1s. I've literally been trying to reach the IRS for 3 weeks with no success. The Claimyr service had me speaking with an actual IRS agent in about 35 minutes. The agent confirmed exactly which lines from my K-1s should be included as investment income on Form 4952 and helped me understand how to handle the excess interest deduction. I was 100% wrong in my skepticism. For anyone struggling with Form 4952 questions who needs to speak with the IRS directly, this is apparently the way to do it. Sorry for the negative comment earlier!

I'm a tax preparer and can confirm some details about Form 4952 line 4a investment income: - Dividends from brokerage accounts DO count (both ordinary and qualified, though including qualified means giving up preferential tax rates) - Interest income counts - Rental income generally does NOT count (it goes on Schedule E) - Capital gains can count if you make a special election Your K-1 interest expenses could be related to either investment or business activities. Check box 13 of your K-1s - if there's a code A, that's investment interest expense which definitely needs Form 4952. But you still need investment income to deduct it against.

This might be a stupid question but how do you know if you even need to fill out Form 4952? I have some margin interest from my brokerage account but my tax software hasn't prompted me to complete this form.

Great thread everyone! I just wanted to add a few practical tips for anyone working through Form 4952: 1. Keep detailed records of what constitutes your investment income vs. other types of income throughout the year. It makes tax time much easier. 2. If you're unsure about whether to make the election for qualified dividends or capital gains, calculate both scenarios before deciding. Sometimes the math doesn't work out in your favor even when you have excess investment interest expenses. 3. Don't forget that any investment interest expense you can't deduct this year carries forward to future years, so it's not completely lost if you don't have enough investment income this year. The distinction between investment income and business income (like rental properties) can be tricky, but it's crucial for getting Form 4952 right. When in doubt, consult the instructions or speak with a tax professional - the rules can be quite nuanced depending on your specific situation.

I've been dealing with Form 4952 for several years now and wanted to share some additional insights that might help others in similar situations. One thing that often trips people up is the timing of when investment interest expenses are deductible. The investment interest expense deduction is limited to your net investment income for the current year - you can't "pre-deduct" against expected future investment income. However, as others mentioned, any excess does carry forward indefinitely. Also, if you have investment expenses other than interest (like investment advisory fees), those are treated differently post-2017 tax reform. Investment advisory fees are no longer deductible as miscellaneous itemized deductions, but investment interest expenses still are deductible (subject to the investment income limitation). For those with complex investment structures involving multiple partnerships or investment entities, I'd strongly recommend working with a tax professional who specializes in investment taxation. The interaction between passive activity rules and investment interest limitations can get quite complex, especially when you have multiple K-1s with different types of income and expenses. The key is making sure you're properly characterizing all your income and expenses before completing Form 4952. Getting that foundation right makes the rest of the form much more straightforward.