The investment interest expense deduction is limited to the taxpayer's net investment income.

The amount of interest which can be deducted in one year is limited to the net investment income of a taxpayer for that year.

Explanation:

This amount can not be exceeded. Investment income according to the IRS includes: ... It does not include eligible dividends or net capital gains other than those that you want to include.

Limitations on investment interest Not all interest that you pay on investment loans are allowed to be deducted. For particular, the IRS forbids registration of certain forms of investment value, including:

1. Home mortgage interest eligible.

2. Value to raise tax-exempt revenue, as if the municipal tax-free bond is to be bought on a margin.

3. Option straddles, which are not available to most investors as an advanced investment strategy.

4. Interest in any passive operation when measuring profit or loss