{"id":175799,"date":"2020-09-09T18:43:00","date_gmt":"2020-09-09T22:43:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/trading-lessons\/trading-expenses\/"},"modified":"2026-06-26T14:52:21","modified_gmt":"2026-06-26T18:52:21","slug":"trading-expenses","status":"publish","type":"trading-lessons","link":"https:\/\/www.interactivebrokers.com\/campus\/trading-lessons\/trading-expenses\/","title":{"rendered":"Trading Expenses"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\"><strong>New to Interactive Brokers?<\/strong><\/p>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button has-custom-width wp-block-button__width-50\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/ndcdyn.interactivebrokers.com\/mkt\/?src=taUSTAXAcc&amp;url=%2FUniversal%2FApplication\" target=\"_blank\" rel=\"noreferrer noopener\">Open Account<\/a><\/div>\n<\/div>\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n<h4>Margin Interest<\/h4>\nIf you trade on margin you pay interest on the funds borrowed to buy securities. Because the interest is\nDIRECTLY TRACEABLE to the purchase of securities it is deductible as investment interest. Because\nmargin interest occurs in your investment account it is presumed to be generated by borrowing for\ninvestment.\n<h4>Payments in Lieu (PIL) Paid<\/h4>\nPayments in Lieu of dividends or interest, or PIL, that you pay to the lenders of securities when you sell\nshort in your own account are also considered to be investment interest. Obviously, the direct\nconnection to an investment exists as the payment is meant to replace either a dividend or interest\npayment that the securities lender lost by loaning the holding.\n<h4>Tax Treatment<\/h4>\nInvestment interest expense is an itemized deduction. If you are a taxpayer who does not itemize then\nthere is no deduction. Investment interest paid \u2013 including PIL &#8211; is not directly deductible against interest\nor dividends. Additionally, the deduction is limited to the amount of investment income. Use Form 4952\nto calculate the deduction.\n\nBe aware of the words DIRECTLY TRACEABLE. Funds can be borrowed from other sources (home equity,\netc.) to make investments and be deductible as investment interest expense. Any borrowings must be\ninvested without any diversion directly into an investment.\n<h4>Other Expenses<\/h4>\nPrior to the 2017 tax act all investment expenses \u2013 other than investment interest &#8211; were considered to\nbe miscellaneous itemized deductions. These expenses were subject to the usual limitations on\nmiscellaneous itemized deductions; the amount deductible had to exceed 2% of AGI and you had to be\nitemizing on your return rather than taking the standard deduction. The 2017 tax act eliminated all\nitemized deductions so at this time none of these fees are deductible for investors. If you are taking the\nposition that you are a trader, then the circumstances change. That is the subject of the next module.","protected":false},"excerpt":{"rendered":"<p>The main topics of this lesson are: Margin Interest; Payments in Lieu (PIL) Paid; Tax Treatment; and Other Expenses. For this lesson refer to the Study Notes and watch the video for a synopsis.<\/p>\n","protected":false},"author":850,"featured_media":221451,"parent":0,"comment_status":"open","ping_status":"closed","template":"","meta":{"_acf_changed":false,"footnotes":""},"contributors-categories":[13576],"traders-academy":[13125,13128,13132],"class_list":["post-175799","trading-lessons","type-trading-lessons","status-publish","has-post-thumbnail","contributors-categories-interactive-brokers","traders-academy-beginner-trading","traders-academy-level","traders-academy-trading-lesson"],"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.9 (Yoast SEO v28.0) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Archives | Traders&#039; Academy | IBKR Campus<\/title>\n<meta name=\"description\" content=\"The main topics of this lesson are: Margin Interest; 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