interest deductions

Interest Deduction

A reduction in one's taxable income that comes from expense from certain interest payments. For example, the interest one pays on one's mortgage is tax deductible so as to encourage home ownership. Likewise, interest paid on a margin account is often deductible. The United States government uses interest deductions, among other statutory tax advantages, to encourage behavior it supports without mandating it.

interest deductions

The IRS allows various interest payments on loans secured by real property to be deducted:Some of these deductions are as follows:

• For business loans, 100 percent of the interest paid each year is a deductible expense.
• For homeowners, the interest on up to $1,000,000 of combined primary and secondary residence home mortgage debt can be deducted.
• Home equity line of credit interest is deductible up to the interest attributable to $100,000 of debt.
• Interest on loans to buy stock in a cooperative building are deductible within the same limits as home interest.
• Co-op apartment owners may deduct their pro rata share of mortgage interest on underlying debt on the building.
For more information see Publication 936,“Home Mortgage Interest Deduction,”at the IRS Web site,

References in periodicals archive ?
First, allocable interest deductions for any LLY cannot exceed the excess of the amount allowable as a deduction for interest paid or accrued by the taxpayer during the LLY, over the average of such amounts for the three tax years preceding the tax year in which the CERT occurred.
The case began when the IRS disallowed certain interest deductions taken by the general partners for several limited partnerships.
A Delaware district court ruled in the Service's favor, disallowing interest deductions generated from a COLI program (CM Holdings, Inc.
The investors sued Cohen and other parties to the transaction, alleging the defendants failed to disclose the related-party sales of the property, which "substantially diminished" the likelihood that the investors would realize desired profits and misled them into believing that they would receive substantial depreciation and interest deductions.
Additional interest deductions may lower taxable income, if any, or increase a company's net operating loss (NOL).
The IRS determined that the cash method of accounting caused excess interest deductions and did not clearly reflect Leverage Leasing's income.
The act contains an "earnings stripping" provision that disallows a corporation's interest deductions to the extent they exceed a specified limitation.
Winn-Dixie also argued that lack of economic substance did not warrant disallowing interest deductions, because the Sec.
24, 1998, the IRS dropped its challenge to Enron's interest deductions arising from the MIPS securities.