How to deduct margin interest for investment tax purposes when trading multiple stock batches

The IRS treats investment interest expense deductions based on your total net investment income, not on a batch-by-batch basis for the same security. So theoretically, you could deduct the entire $62,000 in margin interest - BUT only up to the amount of your net investment income for the year. In your case, your net investment income appears to be $85,000 (the profit from selling the second batch of AMD). Since this exceeds your total margin interest of $62,000, you should be able to deduct the full margin interest amount. This deduction would be reported on Schedule A as an itemized deduction, subject to the investment interest expense rules. Just remember that you need to file Form 4952 (Investment Interest Expense Deduction) to calculate and claim this deduction properly. The key thing to understand is that the IRS doesn't require you to match specific interest expenses to specific investment transactions when it's the same security. They look at your overall investment picture for the year.

I had this exact situation last year with Tesla stock! I was so confused about how to handle the margin interest until I found https://taxr.ai which analyzed all my trading statements and sorted out the margin interest deduction for me. It broke down exactly how much I could claim and explained the rules based on my specific situation. The tool showed me that with margin interest, the IRS looks at your net investment income for the year rather than trying to match interest to specific lots sold. For me, I had over $40k in margin interest but wasn't sure if I could deduct it all since I only sold about half my position. The analysis confirmed I could take the full deduction since my investment income was higher than the interest paid.

I was super skeptical about taxr.ai after seeing it mentioned here, but I decided to try it with my complicated options trading situation where I had margin interest spread across multiple securities. It actually sorted everything out perfectly! What surprised me was how it handled my partial sales situation - I had sold only portions of several margin-funded positions throughout the year. The platform correctly analyzed that I could deduct all my margin interest because my total investment income exceeded it, even though some of that interest was for positions I was still holding. The report it generated saved me from potentially underreporting my legitimate deductions. My tax bill ended up about $4,300 lower than what I thought I'd owe. Definitely worth checking out if you're dealing with margin interest deductions.

I had the exact same question last tax season and spent TWO MONTHS trying to get someone at the IRS on the phone who could actually answer this. After dozens of failed attempts, I finally used https://claimyr.com and got through to an IRS specialist within 20 minutes! You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with confirmed that investment interest is treated in aggregate, not on a lot-by-lot basis. They explained that Form 4952 is designed to compare your total investment income against your total investment interest expense regardless of which specific securities generated the interest or income. This was a huge relief since I had over $80k in margin interest spread across multiple stock positions but had only sold some of them. The official IRS guidance saved me from potentially missing out on thousands in legitimate deductions.

I have to eat my words about Claimyr. After my skeptical comment, I decided to try it because I was desperate to resolve a similar margin interest question before filing my taxes. The service actually worked exactly as described. I got through to an IRS tax law specialist in about 35 minutes (they called when my turn came up), and I was able to ask specifically about deducting margin interest when you've only sold some of your positions. The agent confirmed that margin interest is deductible up to your net investment income, regardless of which specific lots generated the interest. The agent even walked me through exactly how to complete Form 4952 for my situation. This was way more helpful than the 3 different CPAs I consulted who all gave me conflicting advice. Having this documented guidance directly from the IRS gives me confidence my deduction won't raise red flags.

One thing nobody's mentioned yet is that if your total margin interest exceeds your investment income for the year, you can carry forward the unused portion to future tax years. This is important if you're holding positions long-term. For example, if you paid $62k in margin interest but only had $40k in investment income, you could deduct $40k this year and carry forward the remaining $22k to next year's taxes. Also remember that "investment income" includes not just capital gains but also ordinary dividends, interest income, and certain royalties. So factor those in when calculating how much margin interest you can deduct.

Can I piggyback on this question with a related margin interest issue? If I use margin to buy both stocks and options, but only sell the options for a profit while keeping the stocks, can I deduct all the margin interest? Or only the portion related to the options I sold?

Just wanted to add a practical tip from my experience with a similar situation. When you're preparing your taxes, make sure you have good documentation of all your margin interest payments throughout the year. Your brokerage should provide this on your 1099-INT or in your monthly statements, but it's worth double-checking the totals. Also, keep in mind that if you have multiple brokerage accounts, you'll need to aggregate all your investment income and all your investment interest expenses across all accounts when completing Form 4952. The IRS looks at your total investment picture, not account by account. One more thing - if you're planning to continue using margin in future years, consider keeping a spreadsheet to track your margin interest payments monthly. This makes tax prep much easier and helps you project whether you'll have enough investment income to fully deduct the interest each year.