To most taxpayers, deciding which is worse between debt and taxes is like trying to decide which is the lesser of two evils. Being in debt can be oppressive because so much of your hard earned money goes to paying someone with interest for money that you have long since used.
With taxes, it can sometimes feel as if you are working as hard as you can and are not seeing the fruits of your labor because so much of it is going to the State of Missouri and the federal government on an interest free loan. However, there is a silver lining to this tax dilemma, as interest paid on certain loans can be deducted on your tax return.
Which loans fit this description? This post will highlight a couple of them.
Home mortgage loans – If you own a home, chances are the interest on your loan is tax deductible. Congress essentially wanted to spur home ownership, so interest paid on first and second mortgages on such homes as long as the total amount of the loans do not exceed $1 million. In fact, mortgage interest deductions can extend to a second home.
Home equity loans – If you want to make improvements to your home, and you take out a home equity loan, chances are that the interest on this loan is tax deductible as well. However, a home equity loan is to be used to finance a vacation or pay for braces, there may be trouble. The rules only allow deductions when these types of loans are used for improvements and repairs.
This blog post is not legal advice. Questions about your taxes should be directed to an experienced attorney.