Deducting Investment Interest
The deduction for investment interest (IRC Sec 163) is deductible as an interest expense on line 9 of the Schedule A. The investment interest deduction can be no more than investment income less investment expenses. However, investment expenses are a Tier 2 miscellaneous itemized deduction which is suspended 2018 through 2025.
Thus, the bottom-line results seem to be:
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On the positive side - Investment Interest deduction on Schedule A may be higher than before the TCJA because Sch. A investment expenses will not be used in limiting NII, thus allowing a larger interest deduction.
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On the negative side - Investment expenses will not reduce NII, thus possibly causing a larger surtax on NII (the 3.8% surtax).
Investment interest expense is deductible only to the extent of “net investment income.” The amount disallowed because of this provision may be carried over indefinitely. Form 4952 is used to compute the investment interest limitations.
Rev Rul 95-16, 1995-8 IRB 4 states that carryover of excess investment interest to a later tax year isn’t limited by a taxpayer’s taxable income for the tax year in which the interest was paid or accrued.