Doug and Sue Click file a joint tax return and decide to itemize their deductions. The Click's income for the year consists of $90,000 in salary, $2,000 interest income, $800 long-term capital loss. The Click's expenses for the year consist of $1,500 investment interest expense. Assuming that the Click's marginal tax rate is 35%, what is the amount of their investment interest expense deduction for the year?

Question

Quizplus · Accepted Answer

The deductible amount of investment interest expense is limited to the amount of investment income received by the taxpayer, and the excess amount can be carried over to future years. In this case, the Clicks only have $2,000 of interest income to offset their $1,500 investment interest expense, so they can deduct the full $1,500 on their tax return. Therefore, the correct answer is B) $1,500.

Doug and Sue Click File a Joint Tax Return and Decide