Is interest on my stock margin loan tax deductible if I roll it over yearly?

Investment interest expense deductions can be tricky to navigate, but I can help clarify how this works. When you pay interest on loans used to purchase investments (like stocks), that interest is potentially deductible as "investment interest expense" on Schedule A if you itemize. However, there's an important limitation - investment interest expenses are only deductible up to the amount of your net investment income for the year. If you're not currently generating investment income (dividends, interest, capital gains) from these stocks, then you're right that the deduction isn't providing immediate benefit. However, you can carry forward unused investment interest expenses indefinitely until you have investment income to offset them against. Regarding rolling the interest into new loans: The IRS looks at the substance of the transaction, not just the form. As long as the additional borrowed amounts are still being used for investment purposes (which paying interest on an investment loan technically is), the interest on those additional loan amounts should still qualify as investment interest expense.

I went through something similar last year with my margin loans and was totally confused about the tax implications. I stumbled across this AI tax assistant at https://taxr.ai that analyzes tax documents and helped me understand exactly how investment interest expense works in my situation. I uploaded my brokerage statements and loan documents, and it highlighted exactly which portions would be deductible and when. It also showed me how to track my carried-forward investment interest for future years when I actually have investment income. Super helpful for visualizing the long-term tax impact of different strategies.

Just wanted to follow up about my experience with that https://taxr.ai tool mentioned earlier. I decided to try it with my margin loan statements and my previous tax returns, and it was eye-opening. For my situation, it showed that I've been leaving money on the table by paying interest annually with no investment income to offset it. The analysis confirmed I could roll the interest into the loan balance, still preserve the deduction for future years, and use my current cash for other investments instead. The visualization of my potential tax savings over a 5-year period made the decision pretty clear for my particular situation. If you're trying to optimize the tax treatment of investment interest, it's definitely worth checking out. Helped me make a decision I'd been waffling on for months.

I had exactly this same question last year and spent HOURS trying to get through to someone at the IRS who could give me a straight answer. Kept getting disconnected or stuck on hold forever. Eventually found this service called Claimyr at https://claimyr.com that got me connected to an actual IRS agent in about 20 minutes. The IRS rep confirmed that interest rolled into a new loan still maintains its character as investment interest expense as long as the loan proceeds were used for investment purposes. She also explained exactly how to document everything properly. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c Saved me so much frustration compared to the days I wasted trying to call them directly.

I have to admit I was completely wrong about Claimyr. After my skeptical comment earlier, I decided to try it anyway because I had questions about my investment interest deductions that weren't getting answered online. I got connected to an IRS agent in about 35 minutes (which is still WAY faster than the 3+ hours I spent on multiple failed attempts doing it myself). The agent confirmed exactly what I needed to know about tracking carried-forward investment interest when using margin loans. For anyone struggling with specialized tax questions like this investment interest scenario, being able to actually speak with someone at the IRS who knows the rules is incredibly valuable. Totally worth it, and I'm eating my words about being skeptical.

Just to add a slightly different perspective - remember that margin loan interest rates are usually variable and can increase significantly. I rolled my investment interest for 2 years and then got hit with a rate hike that made the growing balance uncomfortable. The tax deduction is nice, but don't forget to factor in the risk of compounding interest at potentially higher future rates. Sometimes paying as you go makes more financial sense even if it's not maximally tax-efficient.

Does anyone know if there's any difference in how this works for different types of brokerage accounts? Like would the deduction rules be different for a trust account vs an individual account?

I appreciate all the detailed discussion here. One thing I want to emphasize for anyone considering this strategy is the importance of keeping meticulous records regardless of which approach you choose. If you decide to roll the interest into new loans, document everything: the original loan amount, each year's interest that gets rolled over, and the cumulative totals. Create a simple spreadsheet tracking the "investment interest basis" versus the actual loan balance. This becomes crucial not just for tax purposes, but also for your own financial planning. Also consider your broker's policies carefully. Some brokerages have restrictions on how they handle rolled-over interest or may charge fees for loan modifications that could eat into any tax benefits. I learned this the hard way when my broker charged me $50 each time I wanted to roll interest into the loan balance. The tax treatment is important, but make sure the overall financial picture (including fees, rate risks, and cash flow impact) still makes sense for your situation.