Tax deductible interest

Tax deductible interest,

Definition of Tax deductible interest:

  1. Tax-deductible interest is a borrowing expense that a taxpayer can claim on a federal or state tax return to reduce taxable income. Types of interest that are tax deductible include mortgage interest for both first and second (home equity) mortgages, mortgage interest for investment properties, student loan interest, and the interest on some business loans, including business credit cards. Personal credit card interest, auto loan interest and other types of personal consumer finance interest are not tax deductible.

  2. Amount paid as interest (on a home mortgage or other qualifying loans) that is allowed by taxation authorities as deductible from a tax payers taxable income.

  3. The Internal Revenue Service (IRS) provides tax deductions that can be used to reduce the taxable income of certain taxpayers. For example, an individual who qualifies for a $3,500 tax deduction can claim this amount against her taxable income of $20,500. Her effective tax rate would then be calculated on $20,500 - $3,500 = $17,000, instead of $20,500. The interest payments made on certain loan repayments can be claimed as a tax deduction on the borrower’s federal income tax return. These interest payments are referred to as tax-deductible interest.

Meaning of Tax deductible interest & Tax deductible interest Definition