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, www.irs.gov.

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