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  • Margin interest is a deductible investment expense on a US 1040 Schedule A as an itemized deduction
  • Margin interest can be carried over year over year until it is fully deducted
  • If the standard deduction exceeds a taxpayer's itemized deductions, they may opt to take the standard deduction instead of itemized Schedule A deductions

If a taxpayer opts to take the standard deduction, is the unclaimed margin interest carryable to future years where they may opt for Schedule A itemized deductions?

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No, it is not. The carryover is for the deductible interest that cannot be deducted because there's not enough investment income. You'll use the form 4592 if that's the case. If you are not itemizing (even though you'd have enough investment income), then the interest is not deductible because you're forgoing the deduction altogether.

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  • You can't carry it even if you do itemize on a future tax year when you aren't forgoing the deduction right? For that matter, do you lose any previously carried interest if you were itemizing, took the standard deduction for a year, then went back to itemizing?
    – arcyqwerty
    Commented May 16, 2023 at 20:16
  • @arcyqwerty not sure I understand. So to clarify, in year X you spent $100 on investment interest, and got $0 investment income. You attach the form 4592 to your tax return and add the carried forward expanse to your expenses in year X+1. On the other hand, in year X you spent $100 on investment interest, had $100 investment income (making the interest currently deductible), but you chose standard deduction for the year X. That $100 investment interest expense is now lost to you.
    – littleadv
    Commented May 16, 2023 at 20:20
  • I don't understand your explanation. My question is: Can I carry forward investment interest expense even if I take the standard deduction? Can you link to one or more authoritative sources, like IRS instructions or publications, to support your answer?
    – ma11hew28
    Commented Oct 24, 2023 at 12:53
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    @ma11hew28 see the instructions to form 1040 (Schedule A) and form 4592. The standard deduction is an election, and if you're making it - you cannot double dip. You can only carry forward disallowed deduction, but if you elect to not deduct and take the standard deduction - it's not disallowed, you chose to not deduct it.
    – littleadv
    Commented Oct 24, 2023 at 16:16

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