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In discussing allowable tax deductions, many people want to know exactly when they can -- and can't -- deduct interest expenses.
Although you can deduct interest in many cases, there are times when interest expenses clearly do not fall within the allowable tax deductions. When allowable, however, interest expense deductions can be a great way of reducing your income tax amount.
So, what are allowable interest deductions available to the individual taxpayer, under federal income tax law?
The general rule is this:
Non-personal interest that was paid or accrued in the tax year may be deductible.
Under the federal income tax law, certain types of interest are not deductible. Generally, personal interest is not deductible. What constitutes "personal interest"?
Keep in mind that this post only refers to deductions available to individuals. Interest may sometimes be deducted as a business expense, too, if it arises in connection with a trade or business. But there are separate and often complex rules that govern the federal income tax law relating to business expense deductions.
Other posts in the Tax Savvy series:
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.