Finance Maxxing
Borrowing & Leverage
Margin Loan
Borrow against brokerage holdings; interest may be deductible.
Margin loans let you borrow against your brokerage account's securities without selling (and triggering capital gains).
How It Works
| Parameter | Typical Values |
|---|---|
| Loan-to-value (initial) | Up to 50% (Reg T) |
| Maintenance requirement | 25–30% |
| Interest rates | 5.5%–12% (varies by broker/size) |
| Repayment | No fixed schedule |
Tax Treatment
Interest is deductible as investment interest expense if you itemize:
- Limited to net investment income (interest, dividends, STCG)
- Can elect to include LTCG (but they lose preferential rate)
- Excess carries forward to future years
- Not deductible if you take the standard deduction
Risks
- Margin call — if portfolio drops below maintenance, broker liquidates at worst time
- Variable rates — broker can change terms anytime
- Compounding — unpaid interest adds to loan balance
- Concentration risk — using one portfolio as collateral and investment
When It Makes Sense
- Short-term liquidity needs (bridge financing, tax payments)
- Avoiding large capital gains realizations
- High-conviction positions you don't want to sell
- After-tax borrowing cost < capital gains tax avoided
Sources
Related Terms
More in Borrowing & Leverage
§1256 Contracts
60/40 tax treatment — 60% LTCG, 40% STCG regardless of holding period.
Box Spread
Synthetic loan using options at near-Treasury rates.
Investment Interest Expense
Deductible against net investment income; requires itemizing.
HELOC (Home Equity Line of Credit)
Borrow against home equity; interest deductible if used for home improvement.
Buy-Borrow-Die Strategy
Borrow against appreciated assets to avoid capital gains; basis steps up at death.