Can I Deduct Margin Interests Costs for a Municipal Bond ETF (MUB)?

[LeviqDrake]

What is the name of your state? CA

I used margin to buy MUB, a municipal bond ETF.
Can I deduct the margin interests in my tax returns, when the ETF holds municipal bonds which produce tax-free returns?
Thanks.

 

[FlyingRon]

If the investment income isn't taxed, you don't get to deduct the interest. Even in the cases of a taxable return, you can't take it anymore (at least for Tax Years 2018-2025). This deduction was in the miscellaneous itemized deductions which were eliminated.

 

[xylene]

Why are you buying munis on margin, especially this one? It has a 52 week range of like 28 cents, not even a 1/4 percent move.

Pretty tough grind.

 

[davew9128]

If the investment income isn't taxed, you don't get to deduct the interest. Even in the cases of a taxable return, you can't take it anymore (at least for Tax Years 2018-2025). This deduction was in the miscellaneous itemized deductions which were eliminated.

Disagree on the deductibility. Not that the interest is allowable, it's not here, but where it would go if it were. Investment interest expense is still deductible to the extent of net investment income.

 

[LdiJ]

Disagree on the deductibility. Not that the interest is allowable, it's not here, but where it would go if it were. Investment interest expense is still deductible to the extent of net investment income.

Huh? Where would you deduct it?

 

[Taxing Matters]

Huh? Where would you deduct it?

Schedule, A line 9, which is specifically labeled "Investment interest". See also the discussion on investment interest expenses on page 34 of Publication 550.

 

[davew9128]

Huh? Where would you deduct it?

Form 4952 is where the computation of allowable deduction is performed before going to Schedule A.

 

[LdiJ]

Schedule, A line 9, which is specifically labeled "Investment interest". See also the discussion on investment interest expenses on page 34 of Publication 550.

I though it was one of those things that was gone. Clearly, I was in total error on that one.

 

[FlyingRon]

I though it was one of those things that was gone. Clearly, I was in total error on that one.

Ditto. I suspect there was some history to this one. Some of the investment information clearly says it was a non-longer allowed misc deduction, but it was ultimately incorrect.

 

[davew9128]

Ditto. I suspect there was some history to this one. Some of the investment information clearly says it was a non-longer allowed misc deduction, but it was ultimately incorrect.

Again I disagree. Investment interest was never addressed in either Congressional chamber's bill before TCJA was enacted. What you're seeing in the investment information you're reading is the writing of people who didn't understand that the deductibility of interest is governed under IRC 163 whereas expenses for the production of income fall under IRC 212. It was 212 where deductions are currently suspended, not 163. This treatment for investment interest expense has pretty much always been treated this way.