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Form 4952


Form 4952 is a tax document used by the Internal Revenue Service (IRS) in the United States. Its purpose is to determine the amount of investment interest expense a person or corporation can deduct for the current year. It also helps to identify any unused interest expenses that can be carried forward to future tax years.


The phonetics of the keyword “Form 4952” would be: “F-aw-r-m F-ow-r N-iy-n F-ow-r F-iy-v T-uw”.

Key Takeaways

Sure, I can provide that. Here are three main takeaways about Form 4952:

  1. Form 4952 is used by individuals, estates, and trusts to figure the amount of investment interest expense deductible for the current year and the amount, if any, to carry forward to future years.
  2. The amount of investment interest expense you can deduct is limited to your net investment income. If your investment interest expenses exceed this limit, the excess can be carried forward to the next tax year.
  3. Form 4952 should not be used if all your interest expenses are from a passive activity. Instead, these expenses should be reported on Form 8582, Passive Activity Loss Limitations.


Form 4952 is significant as it’s used by individuals, estates, and trusts in the United States to compute and determine the amount of investment interest expense that’s deductible for the current tax year and the amount, if any, to carry forward to future years. This form is crucial for taxpayers who have borrowed money to invest and are paying interest on that money. It also plays a key role for those taxpayers who pay interest on loans or incurred other costs related to their taxable investments. By filling out this form, taxpayers can ensure that they are claiming all of the investment interest deductions to which they’re entitled, potentially reducing their overall tax liability.


Form 4952, officially known as the Investment Interest Expense Deduction, is a document issued by the U.S. Internal Revenue Service (IRS). The primary purpose of this form is to allow taxpayers to calculate and claim their deductible investment interest. This is the interest paid on money borrowed to invest in properties, stocks, bonds, or other investment mediums. In other words, when a taxpayer borrows money that is intended for making investments, the interest on the borrowed amount can be reported on Form 4952.Such a tax-deductible provision makes investment more accessible and financially feasible for individuals. Nevertheless, the amount of one’s deductible investment interest is generally limited to one’s net investment income. The Form 4952 is then used to figure out the amount of investment interest expense that one can deduct for the current year and the amount, if any, to carry forward to future years. Ergo, Form 4952 serves as an essential tool for potential and current investors looking to optimize and manage their taxable income by deducting a portion of their investment-related expenses.


Form 4952, officially known as the Investment Interest Expense Deduction, is a tax form used by investors, businesses, or firms for specific financial-related situations. Here are three real-world examples:1. Example 1 – Investment Portfolio Manager: Suppose an independent investment portfolio manager has taken out a loan to purchase more stocks and bonds to expand his investment portfolio. The interest paid on that loan can be reported on Form 4952 to claim a tax deduction. 2. Example 2 – Real Estate Investor: A real estate investor who has borrowed money to acquire rental property can use Form 4952. The money obtained from the loan is used to improve the property to increase its rental income. The interest paid on that loan is considered an investment expense and can be deducted on the investor’s tax returns using Form 4952.3. Example 3 – Small Business: A small business owner borrows money to invest in another business. The interest incurred on this loan can be claimed as a tax deduction using Form 4952 as the money borrowed to invest in another firm can be termed as an investment.

Frequently Asked Questions(FAQ)

What is Form 4952?

Form 4952 is a document filed by taxpayers who want to deduct investment interest expense. The form gives the IRS detailed information regarding the deduction.

Who needs to use Form 4952?

If you have an investment interest expense deduction, that is, interest paid on money borrowed to purchase taxable investments, you need to fill out Form 4952.

What kind of information is required on Form 4952?

Form 4952 primarily requires details about investment income and expenses. This includes the total investment interest expense paid, investment income and any disallowed investment interest expense from the previous year.

Where can I find Form 4952?

Form 4952 is available on the IRS website. It can be downloaded, filled in electronically, printed, and mailed, or submitted online.

How is investment interest expense calculated?

The amount of investment interest expense deductible is limited to your net investment income. This is defined as the total income earned from investment property reduced by allowable expenses related to producing that income.

Can I carry over my unused investment interest expense to the next year?

Yes, if your investment interest expense is more than your net investment income, you can carry over the unused portion to the following year.

Is the interest on loans to purchase tax-exempt investments deductible?

No, the interest on loans used to purchase or hold tax-exempt investments is not deductible.

Can I fill out Form 4952 myself?

Yes, with the right financial information, you can fill out Form 4952 yourself. However, if you find it too complicated, you might want to consider consulting a tax specialist.

How do I determine my investment income?

Investment income is usually derived from various sources such as annuities, dividends, royalties, rental and other income from investment properties, and non-employee compensation.

: Can I use Form 4952 if I have a foreign investment?

Yes. Filing Form 4952 is necessary for all investment interest expenses, including those related to foreign investments. However, keep in mind that there are additional rules and regulations relating to foreign investments.

Related Finance Terms

  • Investment Interest Expense
  • Adjustments to Income
  • Passive Activity Losses
  • Internal Revenue Service (IRS)
  • Tax Deductions

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