Margin Interest Cost Calculator

What is margin interest?

Margin interest is the interest charged by a brokerage on money you borrow to purchase securities on margin. When you open a margin account and buy more securities than your cash balance allows, you are borrowing the difference from your broker — and that loan accrues interest daily at the broker's published margin rate. Margin interest is one of the primary costs of leveraged investing.

Margin rates vary widely across brokers. As of 2025, Interactive Brokers charges as low as 5.33% (for large balances), while most retail brokers charge 9–12% or more. At these rates, margin interest substantially erodes returns unless the borrowed capital generates meaningfully higher returns than the cost of the loan.

The margin interest formula

Margin interest accrues daily on the debit balance (the outstanding loan amount):

Daily Interest = Margin Balance × (Annual Rate / 360)
Total Interest = Daily Interest × Number of Days Held

Margin Balance — the total amount borrowed from the broker. Annual Rate — the broker's published margin rate (as a decimal). 360 — most brokers use a 360-day year for margin interest calculations (some use 365; verify with your broker). Days Held — the number of calendar days the margin balance is outstanding.

Worked example

You purchase $80,000 worth of SPY with $50,000 of your own cash and $30,000 on margin at a 9.5% annual rate. You hold the position for 45 days before selling.

• Step 1: Daily rate = 9.5% / 360 = 0.02639% per day.
• Step 2: Daily interest = $30,000 × 0.0002639 = $7.92/day.
• Step 3: Total interest = $7.92 × 45 = $356.25.
• Step 4: Annualized: $7.92 × 360 = $2,850/year on $30,000 borrowed — a hurdle that SPY must clear just to break even on the leveraged portion.

SPY would need to return at least 9.5% annually on the leveraged $30,000 just to break even on that portion. In a flat or declining market, the margin interest compounds the loss. This illustrates why margin is most suitable for short-duration tactical positions, not long-term buy-and-hold investing.

When to use the margin interest calculator

Use this calculator before entering a leveraged position, to understand the daily cost and the return threshold you need to clear.

• Evaluating the cost of a short-term leveraged trade: Before using margin on a 30–60 day position, calculate the exact interest cost and ensure your expected gain justifies it.
• Comparing broker margin rates: Entering the same position size at two different rates (e.g., 5.5% at IBKR vs. 11% at Fidelity) shows the dollar difference in interest costs — a key input for broker selection for active traders.
• Understanding maintenance margin requirements: Under Reg T, the initial margin requirement is 50% — you can borrow up to 50% of a security's purchase price. FINRA Rule 4210 sets the minimum maintenance margin at 25% of the current market value for long positions (many brokers require 30–35%). This calculator shows how far a position can fall before a margin call.
• Modeling the tax deduction: Margin interest paid on money borrowed to purchase taxable investments is potentially deductible as investment interest expense (IRS Form 4952), limited to your net investment income. Knowing the exact interest amount helps you plan this deduction.

Common mistakes

Margin amplifies both gains and losses. These errors are particularly costly when combined with leverage.

• Ignoring maintenance margin triggers: If SPY drops 20% from $80,000 to $64,000, your equity falls from $50,000 to $34,000 ($64,000 − $30,000 loan). Equity as % of market value = 34,000/64,000 = 53% — still above the 25% minimum. But a 50% drop (to $40,000) leaves equity of $10,000 on a $40,000 position = 25% — right at the maintenance threshold. A broker can issue a margin call with no notice and sell your securities immediately.
• Holding margin overnight in volatile markets: Margin calls can occur after hours or before markets open if a position's value drops below maintenance requirements. Unlike intraday margin, overnight margin is subject to the full maintenance margin rules with no intraday buffer.
• Underestimating compounding margin interest on long holds: A 9.5% margin rate compounds daily. Holding $30,000 of margin for a full year costs $2,850 — and if the investment declines, the loan balance grows relative to equity, potentially triggering a margin call even in a moderately down market.
• Missing the deductibility rules: Margin interest is deductible only against net investment income (interest, dividends, and short-term capital gains). It cannot be deducted against long-term capital gains without an election that forfeits the preferential tax rate on those gains. And it is not deductible at all if the margin is used to buy tax-exempt securities like municipal bonds.

Limitations of margin interest calculations

This calculator computes simple interest on a fixed margin balance at a fixed rate. Real margin accounts are more complex: the balance changes daily as securities are marked to market, dividends are paid, or trades are made. Brokers typically calculate interest on the end-of-day debit balance, so partial-day trades may affect interest differently than expected.

Margin rates at most brokers are tiered by balance size and can change without notice. Interactive Brokers, for example, offers IBKR Pro rates that step down as the debit balance increases: the first $100,000 may be at 6.83% while balances over $1M are at 5.33% (rates as of 2025). Always confirm the current rate schedule for your specific account type and balance level.

Frequently asked questions

What is Regulation T (Reg T)?

Regulation T is a Federal Reserve Board rule that governs the extension of credit by brokers and dealers. It sets the initial margin requirement for purchasing securities at 50% — meaning you must have at least 50% of the purchase price in equity (cash or marginable securities) when entering a new long position. FINRA and individual brokers can set higher requirements, and they frequently do for volatile or low-priced stocks.

How does a margin call work?

A margin call occurs when your account equity falls below the maintenance margin requirement (typically 25–35% of the current market value of your securities). The broker will require you to deposit additional cash or securities, or will sell positions in your account to restore the minimum equity level. Brokers can sell positions without warning — they are not required to notify you before liquidating.

Is margin interest tax deductible?

Margin interest paid on funds used to purchase taxable investments is potentially deductible as investment interest expense, reported on IRS Form 4952. The deduction is limited to your net investment income for the year. Any disallowed deduction can be carried forward indefinitely to future years. The deduction does not apply to margin used for tax-exempt securities or personal consumption.

How does pattern day trader (PDT) status affect margin?

FINRA Rule 4210 designates an account as a Pattern Day Trader (PDT) if four or more day trades occur within five business days and represent more than 6% of total trades in the account. PDT accounts must maintain a minimum equity of $25,000 and receive 4:1 intraday buying power. Falling below $25,000 restricts the account to cash trading until equity is restored.

Related calculators

Margin use intersects with these risk and trading tools:

• Position Size Calculator — determine how much capital to allocate to any trade before applying leverage.
• Options P&L Calculator — model leveraged options positions, which have different margin requirements than equity margin.