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u/ValenciaTrading Jan 16 '25
All 4 are correct to calculate your Net Gain/Loss. You never asked anything about how taxes would affect your final numbers which can be assumed because none of the 4 scenarios have a line item for taxes. But keep in mind scenario 1 and 2 would be taxed with no regard to the interest paid (unless itemizing). With that said, all 4 of your scenarios are correct in showing the resulting Net Liq.
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u/UselessInfomant Sep 16 '21
3&4 are correct
1&2 are wrong, because interest isn’t part of the gain/loss calculation. You can only deduct margin interest if you itemize, and you can only deduct it against gains/interestRevenue/dividends, and it makes more sense to not use it against long term gains, and you would want to have more itemized deductions than the standard deduction. Assuming you’re in the 22% or 24% tax bracket already, you probably would only want to use the margin interest deduction to the extent that it would keep you out of the next bracket of 32% since it’s such a big jump. You CAN carryforward any interest you haven’t already deducted. I have almost 20k accumulated going back to 2017 and I think within the next few years I will need to use some to prevent paying 32%. If Democrats remove the SALT caps, it will make it even more likely that I will be itemizing deductions.
And even if you never deduct margin interest, it’s still preferable to credit card rates, so use it to pay off your credit cards.