 Income tax 2021, 2021. Interest you paid, part number four. Get ready to get refunds to the max, diving into income tax 2021, 2022. Most of this information can be found on Schedule A, tax year 2021 on the IRS website at irs.gov, irs.gov. Income tax formula focused on the itemized deductions, keeping them distinct in our mind from the adjustments to income, the above the line deductions, the deductions for AGI or the Schedule 1 deductions. Also noting the itemized deductions in order to take them, generally need to be higher than the standard deduction in order for them to be beneficial. First page of the form 1040, looking at line 12A, standard deduction or itemized deduction. If we go to the Schedule A, which is the reporting of the itemized deduction used only if the itemized deductions are greater than the standard deductions, categories for the itemized deductions, in general broken out on the left-hand side here, total of the Schedule A itemized deductions if greater than the standard, then going back to page one, line 12A here taking the standard deduction or the itemized deduction if greater. These are the standard deductions that you want to have an idea of so that if you're thinking about whether someone is going to itemize it or not, whether their tax return will be more or less complex due to that, you want to have an idea of what the threshold will be of the standard deduction. Investment interest. So we're still looking at the deductibility of interest primarily looking at here, the itemized deductions on Schedule A, remembering that the big one for interest deduction is related to the mortgage interest. That's the one that could most likely push people over to being able to itemize as opposed to taking the standard deduction once itemizing that could open up other possibilities for deductions which aren't quite as high and in and of themselves might not push someone over to being able to itemize, but once already over the threshold they can basically add to it as well. Now note when you're talking about interest for investments that falls into alignment with what you would naturally think about a little bit more closely than the mortgage interest for an income tax. In other words, an income tax you would expect the things that would naturally be deductible or those things that you have to use or consume in order to generate the revenue that you're being taxed on, not being taxed therefore in the top line, gross income but on the bottom line, the net income most clearly seen this concept is on the Schedule C for example, where you have an income statement, you got the income and then the expenses that you had to use in order to generate that income which might include interest expense for loans that are basically deductible bottom line then is gonna be what you're gonna be taxed on the net amount, not the top line that would be reasonable for an income tax. You have a similar kind of thing with the investment interest. So if you had some kind of investment and you needed to borrow money in order to generate the revenue and you're gonna be paying taxes on the revenue that was generated, you would think you would have a better argument under an income tax system to be able to deduct the expenses including interest expense for that type of investment situation. The mortgage interest is actually the outlier because usually a home is thought of as a personal kind of investment, not a business type of investment. So you would think that the interest related to it wouldn't be deductible, just like other kind of personal things if I took out a loan to go to Disneyland on a vacation or something like that or to the Bahamas or something, then I wouldn't typically get to deduct the interest for that type of thing because it's a personal thing and it's not a business thing. The home is the exception to that general rule. Okay, so we have the investment interest. Investment interest is interest paid on money you borrowed that is allocable to property held for investment. So you're putting money into an investment and you're taking out a loan to do so, therefore the purchasing power interest possibly being deductible. We're looking here in the schedule A, deduction itemized deductions. It doesn't include any interest allocable to passive activities or securities that generate tax exempt income. So if it's tax exempt, then you're not including the income on the income line item. So you would think it would not be fair then to get a deduction related to it because it's not something that you're being taxed on for the income line item. And then there's these rules for passive activities and the whole concept with passive activities gets a little bit complex, but the general idea is that if you're not actively involved in the investment, the tax code is gonna treat that a little bit differently oftentimes than if you're actively involved. So you can get into the passive activity rules. We might talk about them a little bit more if we get into the real estate investing area. Complete and attach form 4952 to figure your deduction investment interest exception. You don't have to file form 4952 if all three of the following applies. So then you don't have to file the form. Number one, your investment interest expense is less than your investment income from interest and ordinary dividends minus any qualified dividends. Two, you have no other deductible investment expenses. And three, you have no disallowed investment interest expenses from 2020.