4952 Investment Interest Expense Deduction

Form

4952

OMB No. 1545-0191

Investment Interest Expense Deduction

Department of the Treasury
Internal Revenue Service

2025

Attach to your tax return.
Go to www.irs.gov/Form4952 for the latest information.

Attachment
Sequence No. 51
Identifying number

Name(s) shown on return

Part I
1
2
3

Total Investment Interest Expense

Investment interest expense paid or accrued in 2025 (see instructions)
Disallowed investment interest expense from 2024 Form 4952, line 7 .
Total investment interest expense. Add lines 1 and 2 . . . . . .

Part II

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1
2
3

Net Investment Income

4a

Gross income from property held for investment (excluding any net gain from
the disposition of property held for investment) . . . . . . . . . .
4a
b Qualified dividends included on line 4a . . . . . . . . . . . . .
4b
c Subtract line 4b from line 4a
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d Net gain from the disposition of property held for investment . . . . . .
4d
e Enter the smaller of line 4d or your net capital gain from the disposition of
property held for investment. See instructions . . . . . . . . . . .
4e
f Subtract line 4e from line 4d
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g Enter the amount from lines 4b and 4e that you elect to include in investment income. See instructions
h Investment income. Add lines 4c, 4f, and 4g . . . . . . . . . . . . . . . . . . .
5
Investment expenses (see instructions) . . . . . . . . . . . . . . . . . . . . .
6
Net investment income. Subtract line 5 from line 4h. If zero or less, enter -0- . . . . . . . .

Part III
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8

4c

4f
4g
4h
5
6

Investment Interest Expense Deduction

Disallowed investment interest expense to be carried forward to 2026. Subtract line 6 from line
3. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . .
Investment interest expense deduction. Enter the smaller of line 3 or line 6. See instructions . .

For Paperwork Reduction Act Notice, see page 4.

Cat. No. 13177Y

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Form 4952 (2025) Created 5/28/25

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Form 4952 (2025)

Section references are to the Internal Revenue Code unless
otherwise noted.

Future Developments
For the latest information about developments related to Form
4952 and its instructions, such as legislation enacted after they
were published, go to www.irs.gov/Form4952.

General Instructions
Purpose of Form
Use Form 4952 to figure the amount of investment interest
expense you can deduct for 2025 and the amount you can carry
forward to future years. Your investment interest expense
deduction is limited to your net investment income.
For more information, see Pub. 550, Investment Income and
Expenses.

Who Must File
If you are an individual, an estate, or a trust, you must file Form
4952 to claim a deduction for your investment interest expense.
Exception. You don’t have to file Form 4952 if all of the
following apply.
• Your investment income from interest and ordinary dividends
minus any qualified dividends is more than your investment
interest expense.
• You don’t have any other deductible investment expenses.
• You don’t have any carryover of disallowed investment
interest expense from 2024.

Allocation of Interest Expense
If you paid or accrued interest on a loan and used the loan
proceeds for more than one purpose, you may have to allocate
the interest. This is necessary because different rules apply to
investment interest, personal interest, trade or business
interest, home mortgage interest, and passive activity interest.
See Temporary Regulations section 1.163-8T, Regulations
section 1.163-15, and Notice 89-35, 1989-1 C.B. 675.

Specific Instructions
Part I—Total Investment Interest Expense
Line 1
Enter the investment interest expense paid or accrued during
the tax year, regardless of when you incurred the indebtedness.
Investment interest expense is interest paid or accrued on a
loan or part of a loan that is allocable to property held for
investment (as defined later).
Include investment interest expense reported to you on
Schedule K-1 from a partnership or an S corporation.
Investment interest expense doesn’t include any of the
following.
• Personal interest under section 163(h), including qualified
residence interest.
• Interest expense that is properly allocable to a passive activity.
Generally, a passive activity is any trade or business activity in
which you don’t materially participate and any rental activity.
See the Instructions for Form 8582, Passive Activity Loss
Limitations, for details.
• Any interest expense that is capitalized, such as construction
interest subject to section 263A.
• Interest expense related to tax-exempt interest income under
section 265.
• Interest expense, disallowed under section 264, on
indebtedness with respect to life insurance, endowment, or
annuity contracts issued after June 8, 1997, even if the
proceeds were used to purchase any property held for
investment.

Property held for investment. Property held for investment
includes property that produces income, not derived in the
ordinary course of a trade or business, from interest, dividends,
annuities, or royalties. It also includes property that produces
gain or loss, not derived in the ordinary course of a trade or
business, from the disposition of property that produces these
types of income or is held for investment. However, it doesn’t
include an interest in a passive activity.
Exception. A working interest in an oil or gas property that
you held directly or through an entity that didn’t limit your
liability is property held for investment, but only if you didn’t
materially participate in the activity.

Part II—Net Investment Income
Line 4a
Gross income from property held for investment includes
income, unless derived in the ordinary course of a trade or
business, from interest, ordinary dividends (except Alaska
Permanent Fund dividends), annuities, and royalties. Include
investment income reported to you on Schedule K-1 from a
partnership or an S corporation. Also include net investment
income from an estate or a trust.
Also include on line 4a (or 4d, if applicable) net passive
income from a passive activity of a publicly traded partnership
(as defined in section 469(k)(2)). See Regulations sections
1.469-10 and 1.7704-1 (including the transition rule of section
1.7704-1(l)) for details.
Net income from certain passive activities, such as rental of
substantially nondepreciable property, may have to be
recharacterized and included on line 4a. For details, see Pub.
925, Passive Activity and At-Risk Rules, or Regulations section
1.469-2(f)(10).
If you are filing Form 8814, Parents’ Election To Report
Child’s Interest and Dividends, part or all of your child’s income
may be included on line 4a. See the Instructions for Form 8814
and Pub. 550 for details.
Don’t include on line 4a any net gain from the
disposition of property held for investment. Instead,
enter it on line 4d.

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CAUTION

Line 4b
Enter the portion of ordinary dividends included on line 4a that
are qualified dividends. For the definition of qualified dividends,
see the instructions for Form 1040, line 3a (or Form 1041, line
2b).

Line 4d
Net gain from the disposition of property held for investment is
the excess, if any, of your total gains over your total losses from
the disposition of property held for investment. When figuring
this amount, include capital gain distributions from mutual funds
and capital loss carryovers.

Line 4e
Net capital gain from the disposition of property held for
investment is the excess, if any, of your net long-term capital
gain over your net short-term capital loss from the disposition of
property held for investment.
Capital gain distributions from mutual funds are treated as
long-term capital gains.
Note: If line 4e is more than zero and you enter an amount on
line 4g, see the Note in the line 4g instructions, later.

Line 4g
In general, qualified dividends and net capital gain from the
disposition of property held for investment are excluded from
investment income. But you can elect to include part or all of
these amounts in investment income.

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Form 4952 (2025)

The qualified dividends and net capital gain that you
elect to include in investment income on line 4g aren’t
eligible to be taxed at the qualified dividends or
CAUTION capital gains tax rates. You should consider the tax
effect of using the qualified dividends and capital gains tax rates
before making this election. Once made, the election can be
revoked only with IRS consent.
To make the election, enter on line 4g the amount you elect to
include in investment income (don’t enter more than the sum of
lines 4b and 4e). Also enter this amount on whichever of the
following applies.
• The Schedule D Tax Worksheet, line 3.
• Schedule D (Form 1041), line 25.
• The Qualified Dividends Tax Worksheet, line 3, in the
Instructions for Form 1041.
If you file Form 1040 or 1040-SR and enter an amount
on line 4g, use the Schedule D Tax Worksheet in the
TIP Instructions for Schedule D (Form 1040) to figure the
amount to enter on Form 1040 or 1040-SR, line 16. If
you file Form 1041 and enter amounts on lines 4e and 4g, use
the Schedule D Tax Worksheet in the Instructions for Schedule
D (Form 1041) to figure the amount to enter on Form 1041,
Schedule G, line 1a.
Don’t reduce the amount of qualified dividends on Form 1040
or 1040-SR, line 3a (or Form 1041, line 2b(2)), by any part of the
amount on line 4g.

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Note: The amount on line 4g is generally treated as being
attributable first to net capital gain from property held for
investment (line 4e), and then to qualified dividends (line 4b).
This treatment results in the least tax being figured for Form
1040 or 1040-SR, line 16 (or Form 1041, Schedule G, line 1a).
However, you can treat less of the amount on line 4e as
attributable to line 4g and more to line 4b. You may want to do
this if you are filing Form 1116, Foreign Tax Credit, as your tax
after credits may be lower in certain cases. To do so, enter on
the dotted line next to line 4e “Elec.” and the part of line 4e that
you elect to treat as being attributable to line 4g (don’t enter
less than the excess of line 4g over line 4b). You will use this
smaller amount instead of the amount on line 4e when figuring
your tax.
Generally, you must make this election on a timely filed return,
including extensions. However, if you timely filed your return
without making the election, you can make the election on an
amended return filed within 6 months of the due date of your
return (excluding extensions). Write “Filed pursuant to section
301.9100-2” on the amended return and file it at the same place
you filed the original return.

Line 5
Investment expenses are your allowed deductions, other than
interest expense, directly connected with the production of
investment income. For example, depreciation or depletion
allowed on assets that produce investment income is an
investment expense.
Include investment expenses incurred directly by you or
reported to you on Schedule K-1 from a partnership, or by an S
corporation, but only if you are allowed a deduction on your
return for the expense.
Investment expenses don’t include any deductions used in
determining your income or loss from a passive activity.
Don’t include any miscellaneous itemized deductions,
which aren’t allowed deductions in tax years
beginning after December 31, 2017, and before
CAUTION January 1, 2026.

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Part III—Investment Interest Expense
Deduction
Line 8
Individuals. Generally, enter the amount from line 8 (excluding
any amount included on Form 6198, line 4—see later) on
Schedule A (Form 1040), line 9, even if all or part of it is
attributable to a partnership or an S corporation. However, if any
part of the interest expense is attributable to royalties, enter that
part on Schedule E (Form 1040). Also, if any part of the interest
is attributable to a trade or business that isn’t a passive activity,
enter that part on the schedule where you report other expenses
for that trade or business.
Estates and trusts. Enter the amount from line 8 (excluding any
amount included on Form 6198, line 4—see below) on Form
1041, line 10. However, if any part of the interest is attributable
to a trade or business that isn’t a passive activity, enter that part
on the schedule where you report other expenses for that trade
or business.
Form 6198. If any of your deductible investment interest
expense is attributable to an activity for which you aren’t at risk,
you must also use Form 6198, At-Risk Limitations, to figure your
deductible investment interest expense. Include the part
attributable to the at-risk activity on Form 6198, line 4.
Alternative minimum tax (AMT). Deductible interest expense
may be an adjustment for the AMT. For details, see Form 6251,
Alternative Minimum Tax—Individuals, or Schedule I (Form
1041).
Paperwork Reduction Act Notice. We ask for the information
on this form to carry out the Internal Revenue laws of the United
States. You are required to give us the information. We need it
to ensure that you are complying with these laws and to allow
us to figure and collect the right amount of tax.
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information are confidential, as required by section 6103.
The time needed to complete and file this form will vary
depending on individual circumstances. The estimated burden
for individual taxpayers filing this form is approved under OMB
control number 1545-0074 and is included in the estimates
shown in the instructions for their individual income tax return.
The estimated burden for all other taxpayers who file this form
is: Recordkeeping, 39 min.; Learning about the law or the
form, 12 min.; Preparing the form, 24 min.; and Copying,
assembling, and sending the form to the IRS, 13 min.
If you have comments concerning the accuracy of these time
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