4952A: Investment Interest Expense Deduction (2024)
Alabama · Alabama DOR · Used for tax years 2024
Alabama Form 4952A calculates the investment interest expense deduction for 2024 and any disallowed expense to carry forward to 2025. It reports investment interest expense, carryovers from 2023, and net investment income, and is attached to your tax return.
Who files this form
Individuals, estates, and trusts claiming an investment interest expense deduction must complete Form 4952A and attach it to their tax return, unless all four of these conditions apply:
- Your only investment income was interest or dividends.
- You have no other deductible expenses connected with producing that interest or dividend income.
- Your investment interest expense is not more than your investment income.
- You have no investment interest expense carryovers from 2023.
What you'll need
Have the following information available, as applicable:
- Your name as shown on your return, identifying number, and return type: individual, estate, or trust.
- Amounts of investment interest paid or accrued in 2024.
- Your 2023 Form 4952A, line 5, for any disallowed interest carried forward.
- Schedule K-1 from a partnership or S corporation showing investment interest, income, or expenses.
- Amounts of investment income and allowed investment expenses, including net investment income from an estate or trust.
- Schedule A (Form 40 or 40NR) and any other forms or schedules reporting investment expenses.
How to file
Attach Form 4952A to your tax return. The text does not provide a mailing address or e-file directions.
To complete the calculation:
- Enter investment interest paid or accrued in 2024 on line 1.
- Enter the carryover from your 2023 Form 4952A, line 5, on line 2.
- Add lines 1 and 2 on line 3.
- Enter net investment income on line 4.
- Subtract line 4 from line 3 on line 5. If the result is zero or less, enter zero. This is the amount carried forward to 2025.
- Enter the smaller of line 3 or line 4 on line 6. This is your investment interest expense deduction.
Individuals: Enter line 6 on Schedule A (Form 40 or 40NR), line 13. Enter any portion attributable to royalties on Schedule E (Form 40 or 40NR) instead.
Estates and trusts: Enter the deduction on Form 41, page 3, Schedule C, column C, line 10.
Common mistakes
- Applying the federal passive income limitation to the Alabama calculation. The form cautions that Alabama's investment interest deduction is computed as if that limitation did not exist.
- Leaving out net capital gain from investment property. The same caution says this gain is included in investment income for Alabama purposes.
- Forgetting investment interest reported on Schedule K-1. The line 1 instructions specifically remind you to include investment interest expense reported by a partnership or S corporation.
Questions people ask
What does Form 4952A calculate?
It figures the investment interest expense you can deduct for the current year and any amount you can carry forward to future years.
What is net investment income?
It is the amount, if any, by which investment income exceeds investment expenses. Investment expenses are allowed deductions, other than interest expense, directly connected with producing investment income.
Can I include home mortgage interest?
No. Investment interest expense does not include home mortgage interest or capitalized interest, such as construction interest subject to Federal Section 263A.
What if I used one loan for several purposes?
You may need to allocate the interest. Different rules apply to investment interest, personal interest, trade or business interest, and home mortgage interest.
What happens to investment interest I cannot deduct for 2024?
Line 5 calculates the disallowed investment interest expense carried forward to 2025. Subtract line 4 from line 3, and enter zero if the result is zero or less.