Taxes Tax Planning What Is IRS Publication 550? IRS Publication 550 Explained in Under 4 Minutes By Logan Allec Logan Allec Facebook Twitter Website Logan Allec is a licensed Certified Public Accountant (CPA) and a personal finance expert. He has more than a decade of experience consulting and writing about taxes, tax planning, credit cards, budgeting, and more. Logan also has a master's in taxation from the University of Southern California (USC). learn about our editorial policies Updated on January 24, 2022 Reviewed by Eric Estevez Reviewed by Eric Estevez Eric is a duly licensed Independent Insurance Broker licensed in Life, Health, Property, and Casualty insurance. He has worked more than 13 years in both public and private accounting jobs and more than four years licensed as an insurance producer. His background in tax accounting has served as a solid base supporting his current book of business. learn about our financial review board Share Tweet Pin Email In This Article View All In This Article Definition and Example of IRS Publication 550 How IRS Publication 550 Works Who Uses IRS Publication 550? Where To Get IRS Publication 550 How To Read IRS Publication 550 Definition IRS Publication 550 is a guide published by the IRS to provide information to taxpayers about how investment income and expenses are treated for tax purposes. Photo: Tom Werner / Getty Images IRS Publication 550 is a guide published by the IRS to provide information to taxpayers about how investment income and expenses are treated for tax purposes. Learn what IRS Publication 550 covers, how it treats income and expenses from income, and how it can help you file your taxes. Definition and Example of IRS Publication 550 IRS Publication 550 is an IRS guide to help taxpayers determine how to treat investment income and expenses on their tax returrns. For example, if a taxpayer paid margin interest to their brokerage during the year, they can consult IRS Publication 550 to determine how to treat this interest on their tax return. How IRS Publication 550 Works IRS Publication 550 has five chapters. The first four chapters have to do with explaining the tax treatment of various forms of investment income and expenses, while the fifth chapter provides information on how taxpayers can get tax help. Chapter 1: Investment Income Chapter 1 covers the tax treatment of investment income such as: Interest income Original issue discount Dividend income Income from debt securities such as real estate mortgage investment conduits (REMICs), financial asset securitization investment trusts (FASITs), and other collateralized debt obligations (CDOs) Income from S corporations Income from investment clubs Chapter 1 also covers topics such as the net investment income tax (NIIT) and the kiddiee tax. Note Form 550’s interest income guidelines cover interest reported on forms 1099-INT and 1099-OID and address exempt-interest dividends, VA dividends, and individual retirement accounts. Chapter 2: Tax Shelters and Other Reportable Transactions Chapter 2 covers abusive tax shelters, which are investment schemes with little economic substance that are designed to generate tax deductions or credits for investors. If the IRS deems a transaction to be an abusive tax shelter, it will disallow the tax benefits derived from the shelter. In order to help itself uncover abusive tax shelters, the IRS requires taxpayers who have certain kinds of transactions during the year to report them on Form 8886. Chapter 3: Investment Expenses Chapter 3 covers the tax treatment of investment expenses such as: Investment interest expense Bond premium amortization Non-deductible interest expenses Chapter 4: Sales and Trades of Investment Property Chapter 4 covers key tax concepts pertaining to transactions involving investments (including property) such as: Establishing what constitutes a sale or trade of an investment Calculating one’s basis in investment property Calculating gain or loss on the sale of investment property How to account for transfers of investment property between spouses Calculating capital gains and losses Chapter 5: How to Get Tax Help Chapter 5 is not specific to Publication 550; it is found in several other IRS publications. In this chapter, the IRS provides information to taxpayers about where they can get assistance with their tax returns. Who Uses IRS Publication 550? Taxpayers with investment income and expenses use IRS Publication 550 to determine how to treat these items on their tax return. Note Tax professionals may also use IRS Publication 550 as they prepare clients’ tax returns. Where To Get IRS Publication 550 There are multiple ways for taxpayers to get IRS Publication 550. You can download it in PDF, HTML, or eBook format from the IRS website, and you can obtain it in-person from a local IRS Taxpayer Assistance Center. Taxpayers can also obtain IRS Publication 550 by U.S. mail by submitting a request online or by calling 800-829-3676. Phone hours are Monday through Friday from 7 a.m. until 10 p.m. (local time, except for Alaska and Hawaii, whose residents should use Pacific Time). How To Read IRS Publication 550 IRS publications are intended to be written in an easily-understandable manner. It is important for taxpayers to understand that although IRS publications—including IRS Publication 550—are easy to read, they are not the ultimate authority when it comes to tax matters. They are simply the IRS’ application and plain-English explanation of the tax law. Key Takeaways: Key Takeaways IRS Publication 550 is a guide the IRS has published on how to treat and report investment income and expenses.IRS Publication 550 is divided into five chapters. The first four chapters address specific tax issues pertaining to investment income and expenses. The last chapter gives general information on where taxpayers can get help with their tax returns.Like most IRS publications, IRS Publication 550 is written in easy-to-understand language.Taxpayers should keep in mind that the tax code and regulations, not IRS publications, are the ultimate authority on tax matters. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. IRS. "Publication 550 (2020), Investment Income and Expenses." Accessed Nov. 17, 2021. IRS. "Forms and Publications by U.S. Mail." Accessed Nov. 17, 2021. Harvard Law School Tax Library. "Tax Law." Accessed Nov. 17, 2021.