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Form STATE OF HAWAII — DEPARTMENT OF TAXATION

N-158 Investment Interest Expense Deduction
(REV. 2023) Attach to Form N-11, N-15, or N-40. 2023 N158_I 2023A 01 VID01
Name(s) as shown on return Social security number or employer identification number

Part I Total Investment Interest Expense

1 Investment interest expense paid or accrued in 2023. See Instructions .................................................................. 1

2Disallowed investment interest expense from 2022 Form N-158, line 7 .................................................................. 2

3 Total investment interest expense. Add lines 1 and 2 .......................................................................................... 3

Part II Net Investment Income
4 a Gross income from property held for investment (excluding any net gain from the disposition of
property held for investment) .................................................................................................................................... 4a

b Net gain from the disposition of property held for investment ............................ 4b
c Enter the smaller of line 4b or your net capital gain from the disposition
of property held for investment ........................................................................... 4c

dLine 4b minus line 4c. ............................................................................................................................................... 4d

eEnter the amount from line 4c that you elect to include in investment income. See Instructions ............................. 4e

Investmentf income. Add lines 4a, 4d, and 4e. .......................................................................................................... 4f

5Investment expenses. See Instructions .................................................................................................................... 5

6 Net investment income. Line 4f minus line 5. If zero or less, enter -0- .................................................................. 6

Part III Investment Interest Expense Deduction

7Disallowed investment interest expense to be carried forward to 2024. Line 3 minus line 6. If zero or less,
enter -0- ................................................................................................................................................................... 7

8 Investment interest expense deduction. Enter the smaller of line 3 or line 6. See Instructions ......................... 8

General Instructions Who Must File Specific Instructions
Section references are to the Internal Revenue If you are an individual, estate, or a trust, you
Code unless otherwise noted. must file Form N-158 to claim a deduction for Part I — Total Investment Interest
your investment interest expense. Expense
Note Exception. You do not have to file Form N-158 if Line 1
Section 265 (with respect to the nondeductibility all of the following apply. Enter the investment interest expense paid or
of expenses and interest relating to tax-exempt Your investment income from interest accrued during the tax year, regardless of when
income) shall be operative; except that it shall •
and ordinary dividends is more than your you incurred the indebtedness. Investment
not apply to expenses and interest for royalties investment interest expense. interest expense is interest paid or accrued on a
and other income derived from any patents, loan or part of a loan that is allocable to property
copyrights, and trade secrets by an individual or • You do not have any other deductible
a qualified high technology business as defined investment expenses. held for investment (as defined later).
in section 235-7.3, Hawaii Revised Statutes. • You do not have any carryover of disallowed Include investment interest expense reported
Such expenses shall be deductible. investment interest expense from 2022. to you on Schedule K-1 from a partnership or
an S corporation. Include amortization of bond
Purpose of Form Allocation of Interest Expense premium on taxable bonds purchased after
Use Form N-158 to figure the amount of If you paid or accrued interest on a loan and October 22, 1986, but before January 1, 1988,
investment interest expense you can deduct for used the loan proceeds for more than one unless you elected to offset amortizable bond
2023 and the amount you can carry forward to purpose, you may have to allocate the interest. premium against the interest payments on the
future years. Your investment interest expense This is necessary because different rules apply bond. A taxable bond is a bond on which the
deduction is limited to your net investment to investment interest, personal interest, trade or interest is includible in gross income.
income. business interest, home mortgage interest, and Investment interest expense does not
passive activity interest. See federal Publication include any of the following:
For more information, get federal Publication 535, Business Expenses. Home mortgage interest.
550, Investment Income and Ex penses. •
FORM N-158
ID NO 01

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Form N-158
(Rev. 2023) Page 2

• Interest expense that is properly allocable to Line 4b the Itemized Deductions Worksheet - For
a passive activity. Generally, a passive activity Nonresidents in the Form N-15 Instructions,
is any trade or business activity in which you Net gain from the disposition of property held or on line 46 of the Itemized Deductions
do not materially participate and any rental for investment is the excess, if any, of your total Worksheet - For Part-Year Residents in the
activity. See the separate instructions for gains over your total losses from the disposition Form N-15 Instructions, or
federal Form 8582, Passive Activity Loss of property held for investment. When figuring
Limitations, for details. this amount, include capital gain distributions • The total on line 29 of the Itemized Deductions
from mutual funds and capital loss carryovers. Worksheet in the Form N-11 Instructions,
• Any interest expense that is capitalized, such on line 30 of the Itemized Deductions
as construction interest subject to section Line 4c Worksheet - For Nonresidents in the Form
263A. Net capital gain from the disposition of property N-15 Instructions, or on line 55 of the Itemized
• Interest expense related to tax-exempt interest held for investment is the excess, if any, of your Deductions Worksheet - For Part-Year
income under section 265. net long-term capital gain over your net short- Residents in the Form N-15 Instructions
• Interest expense, disallowed under section term capital loss from the disposition of property Example. Assume line 25 of the Itemized
264, on indebtedness with respect to life held for investment. Deductions Worksheet in the Form N-11
insurance, endowment, or annuity contracts Capital gain distributions from mutual funds are Instructions includes investment expenses of
issued after June 8, 1997, even if the proceeds treated as long-term capital gains. $3,000, and line 29 of the Itemized Deductions
were used to purchase any property held for Line 4e Worksheet is $1,300 after the 2% adjusted gross
investment. income limitation. Investment expenses from
In general, net capital gain from the disposition the Itemized Deductions Worksheet of $1,300
Property Held for Investment. Property held of property held for investment is excluded from are used to figure the amount of investment
for investment includes property that produces investment income. But you can elect to include expenses for line 5. If investment expenses
income, not derived in the ordinary course of part or all of this amount in investment income. of $800 were included on line 25 and line 29
a trade or business, from interest, dividends, of the Itemized Deductions Worksheet was
annuities, or royalties. It also includes property The net capital gain that you elect to include in
that produces gain or loss, not derived in the investment income on line 4e is not eligible to $1,300, investment expenses from the Itemized
ordinary course of a trade or business, from the be taxed at the 7.25% maximum capital gains Deductions Worksheet of $800 would be used.
disposition of property that produces these types tax rate (Tax on Capital Gains Worksheet in the Part III — Investment Interest
of income or is held for investment. However, it Form N-11 or Form N-15 Instructions, or Part VI Expense Deduction
does not include an interest in a passive activity. of Schedule D (Form N-40)). You should consider
the tax effect of using the capital gains tax rate Line 8
Exception. A working interest in an oil or before making this election. You may deduct the amount on line 8 as
gas property that you held directly or through an
entity that did not limit your liability is property To make the election, enter on line 4e investment interest expense.
held for investment, but only if you did not the amount you elect to include in investment Individuals. Generally, enter the amount from
materially participate in the activity. income. line 8 (excluding any amount included on federal
Part II — Net Investment Income Line 5 Form 6198, line 4 – see below) on line 13 of the
Itemized Deductions Worksheet in the Form
Line 4a See Note on page 1. N-11 Instructions, on line 14 of the Itemized
Investment expenses are your allowed Deductions Worksheet - For Nonresidents in
Gross income from property held for investment deductions, other than interest expense, directly the Form N-15 Instructions, or on line 22 of the
includes income, unless derived in the ordinary connected with the production of investment Itemized Deduction Worksheet - For Part-Year
course of a trade or business, from: income. For example, depreciation or depletion Residents in the Form N-15 Instructions, even if
• Interest, allowed on assets that produce investment all or part of it is attributable to a partnership or an
• Ordinary dividends (except Alaska Permanent income is an investment expense. S corporation. However, if any part of the interest
Fund dividends), Include investment expenses reported to expense is attributable to royalties, enter that
• Annuities, and you on Schedule K-1 from a partnership or an S part on federal Schedule E. Also, if any part of
• Royalties. corporation. the interest is attributable to a trade or business
that is not a passive activity, enter that part on
Include investment income reported to you Investment expenses do not include any the schedule where you report other expenses
on Schedule K-1 from a partnership or an S deductions used in determining your income or for that trade or business.
corporation. Also include net investment income loss from a passive activity.
from an estate or a trust. If you have investment expenses that Estates and Trusts. Enter the amount from
Also include on line 4a (or 4b, if applicable) are included as a miscellaneous itemized line 8 (excluding any amount included on federal
net passive income from a passive activity of a deduction on line 25 of the Itemized Deductions Form 6198, line 4 – see below) on Form N-40,
publicly traded partnership (as defined in section Worksheet in the Form N-11 Instructions, on line line 10. However, if any part of the interest is
469(k)(2)). See Notice 88-75, 1988-2 C.B. 386, 25 of the Itemized Deductions Worksheet - For attributable to a trade or business that is not a
for details. Nonresidents in the Form N-15 Instructions, or passive activity, enter that part on the schedule
on line 46 of the Itemized Deductions Worksheet where you report other expenses for that trade
Net income from certain passive activities, - For Part-Year Residents in the Form N-15 or business.
such as rental of substantially nondepreciable Instructions, the 2% adjusted gross income Federal Form 6198. If any of your deductible
property, may have to be recharacterized and limitation on line 28 of the Itemized Deductions investment interest expense is attributable to an
included on line 4a. See federal Publication Worksheet in the Form N-11 Instructions, on line activity for which you are not at risk, you must
925, Passive Activity and At-Risk Rules, or 29 of the Itemized Deductions Worksheet - For also use federal Form 6198, At-Risk Limitations,
Regulations section 1.469-2(f)(10) for details. Nonresidents in the Form N-15 Instructions, or to figure your deductible investment interest
If you are filing Form N-814, Parent’s on line 54 of the Itemized Deductions Worksheet expense. Include the part attributable to the at-
Election to Report Child’s Interest and Dividends, - For Part-Year Residents in the Form N-15 risk activity on federal Form 6198, line 4. See
part or all of your child’s income may be included Instructions may reduce the amount you must federal Form 6198 and its instructions for details.
on line 4a. See the instructions for Form N-814 include on Form N-158, line 5.
for details. Include on Form N-158, line 5, the smaller of:
Caution: Do not include on line 4a any net The investment expenses included on line
gain from the disposition of property held for •
25 of the Itemized Deductions Worksheet
investment. Instead, enter this amount on line 4b. in the Form N-11 Instructions, on line 25 of

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