What Is IRS Publication 550?

IRS Publication 550 Explained in Under 4 Minutes

A woman reviews paperwork at a small restaurant table

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.

Publication 550 is an Internal Revenue Service (IRS) guide that helps taxpayers determine how to treat investment income and expenses on their tax returns. You can consult this publication to determine how to treat the interest on their tax return if you paid margin interest to their brokerage during the year.

Learn what IRS Publication 550 covers, how it treats income and expenses from income, and how it can help you file your tax returns.

Key Takeaways

  • IRS Publication 550 is a guide the IRS has published on how to treat and report investment income and expenses.
  • The publication 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.

How IRS Publication 550 Works

IRS publications are written in easily understandable language and format, but it's important for taxpayers to understand that they're not the ultimate authority when it comes to tax matters. They're the IRS’s application and plain-English explanation of the tax law.

That said, Publication 550 is designed to give you a fundamental understanding of taxable investment income and expenses so you'll be armed with this knowledge if you decide to seek professional help with your tax return or even prepare your tax return yourself.

Example of IRS Publication 550

IRS Publication 550 has five chapters. The first four explain 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 kiddie tax.


Form 550’s interest income guidelines cover interest reported on Forms 1099-INT and 1099-OID. They address exempt-interest dividends, VA dividends, and individual retirement accounts.

Chapter 2: Tax Shelters and Other Reportable Transactions

Chapter 2 covers abusive tax shelters: investment schemes with little economic substance that are designed to generate tax deductions or credits for investors. The IRS will disallow the tax benefits derived from the shelter if it deems a transaction to be abusive.

Chapter 3: Investment Expenses

Chapter 3 covers the tax treatment of investment expenses, including:

Chapter 4: Sales and Trades of Investment Property

Chapter 4 covers key tax concepts pertaining to transactions involving investments, including property. They include:

  • Establishing what constitutes a sale or trade of an investment
  • Calculating your 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 isn't specific to Publication 550. It's found in several other IRS publications as well. The IRS provides information to taxpayers in this chapter regarding 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. 


Tax professionals may also use IRS Publication 550 as they prepare clients’ tax returns.

Where To Get IRS Publication 550

You can download Publication 550 in PDF, HTML, or eBook format from the IRS website, or you can obtain it in person from a local IRS Taxpayer Assistance Center.

You 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).

Frequently Asked Questions (FAQs)

How does the IRS identify abusive tax shelters?

The IRS requires taxpayers who have certain kinds of transactions during the year to report them on Form 8886. This helps the agency uncover abusive tax shelters, along with other types of investigations.

What is the net investment income tax and how do I know if I'm liable for it?

The net investment income tax applies only to relatively high earners: those with modified adjusted gross incomes (MAGIs) ranging from $200,000 to $250,000 depending on filing status, although the threshold is only $125,000 for those who are married but file separate returns. Publication 550 explains all the qualifying criteria.

Was this page helpful?
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.
  1. Harvard Law School Tax Library. "Tax Law."

  2. IRS. "Publication 550, Investment Income and Expenses."

  3. IRS. "Forms and Publications by U.S. Mail."

  4. IRS. "Find Out If Net Investment Income Tax Applies to You."

Related Articles