Alabama Investment Interest Expense Deduction

Investment Interest Expense Deduction
4952A
*23002749*

FORM

4952A

Alabama Department of Revenue

Investment Interest Expense Deduction

2023

ATTACH TO YOUR TAX RETURN

Name(s) as shown on your return

Type of return . . . . . . . . . . . . . .

អ

Identifying number

Individual . . . . . . . . . . . . .

អ

Estate . . . . . . . . . . . . . . .

អ

Trust

1 Interest expense on investment debts paid or accrued in 2023 (see instructions). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

2 Disallowed investment interest expense from 2022 Form 4952A, line 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2

3 Total investment interest expense. Add lines 1 and 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

4 Net investment income (see instructions). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

5 Disallowed investment interest expense to be carried forward to 2024. Subtract line 4 from line 3. If zero or less, enter –0–. . . . . . .

5

6 Investment interest expense deduction. Enter the smaller of line 3 or line 4 (see instructions). . . . . . . . . . . . . . . . . . . . . . . . . . . . . ៑ 6

GENERAL INSTRUCTIONS
PURPOSE OF FORM
Interest expense paid by an individual, estate, or trust on a loan that is allocable to property held for investment (defined below), may not be fully deductible in the current year. Form 4952A is used to figure the amount of
investment interest expense deductible for the current year and the amount,
if any, to carry forward to future years.
For more details, refer to Federal Publication 550, Investment Income and
Expenses.
CAUTION: The investment interest deduction for Alabama is computed
as if the federal passive income limitation did not exist. Net capital gain
from the disposition of investment property is included in investment
income for Alabama purposes.
WHO MUST FILE
If you are an individual, estate, or trust, and you claim a deduction for investment interest expense, you must complete and attach Form 4952A to your
tax return unless all of the following apply:
•  Your only investment income was from interest or dividends,
•  You have no other deductible expenses connected with the production of
interest or dividends,
•  Your investment interest expense is not more than your investment income,
•  And you have no carryovers of investment interest expense from 2022.
ALLOCATION OF INTEREST EXPENSE UNDER TEMPORARY FEDERAL
REGULATIONS SECTION 1.163-8T
If you paid or accrued interest on a loan and you used the proceeds of the
loan for more than one purpose, you may have to allocate the interest paid.
This is necessary because of the different rules that apply to investment interest, personal interest, trade or business interest, and home mortgage interest. See Federal Publication 550, Investment Income and Expenses.

SPECIFIC INSTRUCTIONS
LINE 1 – INVESTMENT INTEREST EXPENSE
Enter the investment interest paid or accrued during the tax year, regardless of when the indebtedness was incurred. Include interest paid or accrued
on a loan (or part of a loan) that is allocable to property held for investment.
Be sure to include investment interest expense reported to you on Schedule K-1 from a partnership or an S corporation. Include amortization of bond
premium on taxable bonds purchased after October 22, 1986, but before January 1, 1988, unless you elected to offset amortizable bond premium against
the interest payments on the bond. A taxable bond is a bond on which the interest is includible in gross income.
Investment interest expense does not include the following:
•  Home mortgage interest,
•  Any interest expense that is capitalized, such as construction interest subject to Federal Section 263A.

LINE 4 –  NET INVESTMENT INCOME
Net investment income is the excess, if any, of investment income over investment expenses. Include investment income and expenses 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.
INVESTMENT INCOME
Investment income includes income (not derived in the ordinary course of
a trade or business) from interest, dividends (reduced by qualified dividends
per federal instructions), annuities, royalties, and net gain from the disposition of property held for investment (including capital gain distributions from
mutual funds).
PROPERTY HELD FOR INVESTMENT
Property held for investment includes property that produces investment income. Property held for investment also includes an interest in an activity of
conducting a trade or business in which you did not materially participate.
INVESTMENT EXPENSES
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.
If you have investment expenses that are included as a miscellaneous
itemized deduction on line 21 of Schedule A (Form 40), or line 26 of Schedule
A (Form 40NR), you may not have to use all of the amount for purposes of line
4 of Form 4952A. The 2% adjusted gross income limitation on Schedule A
may reduce the amount.
To figure the amount to use, compare the amount of the investment expenses included on line 21 of Schedule A (Form 40) with the total miscellaneous expenses on line 24 of Schedule A. If you filed Schedule A (Form
40NR), compare the amount on line 26 with the amount on line 29. The
smaller of the investment expenses included on line 21 (or line 26) or the total
of line 24 (or line 29) is the amount to use to figure the investment expenses
from Schedule A for line 4.
Example: Assume line 21 of Schedule A (Form 40) includes investment expenses of $3,000, and line 24 is $1,300 after the 2% adjusted gross income
limitation. Investment expenses of $1,300 are used to figure the amount of investment expense for line 4. If investment expenses of $800 were included on
line 21 and line 24 was $1,300, investment expenses of $800 would be used.
If you have investment expenses reported on a form or schedule other
than Schedule A, include those expenses when figuring investment expenses
for line 4.
LINE 6 –  INVESTMENT INTEREST EXPENSE DEDUCTION
This is the amount you may deduct as investment interest expense.
INDIVIDUALS
Enter the amount from line 6 on line 13 of Schedule A (Form 40 or 40NR),
even if all or part of it is attributable to a partnership or an S corporation. However, if any portion of this amount is attributable to royalties, enter that portion
of the interest expense on Schedule E (Form 40 or 40NR).
ESTATES AND TRUSTS
Enter on Form 41, Page 3, Schedule C, Column C, Line 10.