Margin Interest Cost Calculator

Detailed results
Net gain (return minus interest)Expected return exceeds margin cost.	$6,147
Break-even annual return needed	3.85%
Leverage multiplier	1.67
Expected portfolio gain	$10,000

Net gain (return minus interest)Expected return exceeds margin cost.

$6,147

Break-even annual return needed

3.85%

Leverage multiplier

1.67

Expected portfolio gain

$10,000

Daily Interest Accrual. 13 rows, first 12 shown.
Month	Monthly interest	Cumulative interest
1	$317	$317
2	$317	$633
3	$317	$950
4	$317	$1,267
5	$317	$1,583
6	$317	$1,900
7	$317	$2,217
8	$317	$2,533
9	$317	$2,850
10	$317	$3,167
11	$317	$3,483
12	$317	$3,800

Month

Monthly interest

Cumulative interest

$317

$633

$317

$950

$317

$1,267

$317

$1,583

$317

$1,900

$317

$2,217

$317

$2,533

$317

$2,850

$317

$3,167

$317

$3,483

$317

$3,800

How this is calculated

Interest = margin_balance × (annual_rate / 360) × holding_days. Break-even return = (interest / portfolio_value) × (365 / holding_days).

Margin borrowing lets you buy more securities than your cash alone allows, using your existing portfolio as collateral. It amplifies both gains and losses — and carries a daily interest charge on the borrowed amount.

How margin interest is calculated. Most brokers use a 360-day year: daily rate = annual rate ÷ 360. Interest accrues daily and is typically charged monthly to your account.

The break-even hurdle. For margin to be worth it, your portfolio return must exceed the margin rate. If you borrow at 9.5% and your portfolio returns 8%, you lose money net of interest — even before taxes.

Leverage amplifies losses. If you invest $100,000 ($60,000 cash + $40,000 margin) and the portfolio drops 25%, you've lost $25,000 — but still owe $40,000 on the margin loan. Your equity falls from $60,000 to $35,000 (a 42% loss of your own capital).

Margin calls. FINRA requires a minimum maintenance margin of 25%; most brokers require 30–35%. If your equity falls below this threshold, you'll face a margin call — forced to either deposit more cash or sell securities at potentially unfavorable prices.

Assumptions

Interest uses a 360-day year as is common among US broker-dealers.

Portfolio value remains constant (actual value fluctuates, affecting margin equity).

Maintenance margin requirement is simplified at 25%; actual broker requirements vary (typically 30-35%).

Expected return is a user-supplied estimate; actual returns are uncertain.

Tax deductibility of margin interest is not calculated — consult a tax advisor.

Frequently asked questions

›What is a margin call?

A margin call occurs when your equity falls below the broker's maintenance margin requirement (typically 30-35% of portfolio value). You must deposit cash or securities, or the broker may liquidate positions without notice.

›Is margin interest tax-deductible?

Margin interest used to buy taxable investments may be deductible as investment interest expense on Schedule A, limited to your net investment income. It's not deductible if used to buy municipal bonds or in retirement accounts.

›How do brokers set margin rates?

Most brokers tier rates based on the loan balance — larger balances get lower rates. Rates are typically tied to the Federal Funds rate or broker call rate plus a spread.

›Can margin be used in an IRA?

No. IRS rules prohibit margin lending in IRAs. You can use 'limited margin' (to settle trades before funds clear) at some brokers, but not to borrow cash against your IRA.

›When does using margin make sense?

Margin makes mathematical sense only when your expected after-tax return reliably exceeds the margin rate. Most retail investors are better served avoiding margin entirely given the risk of margin calls and loss amplification.

Inputs

What this result means

Daily Interest Accrual

How this is calculated

Assumptions

Frequently asked questions

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