Ernst & Young Tax Guide 2018, 33rd Edition

Chapter 24 Interest expense

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• Home Mortgage Interest
  • Amount Deductible
  • Special Situations
  • Points
  • Special Situations
  • Mortgage Insurance Premiums
  • Form 1098, Mortgage Interest Statement
• Investment Interest
  • Investment Property
  • Allocation of Interest Expense
  • Limit on Deduction
• Items You Cannot Deduct
  • Personal Interest
• Allocation of Interest
• How To Report

Note

IRS Publication 17 (Your Federal Income Tax) has been updated by Ernst & Young LLP for 2017. Dates and dollar amounts shown are for 2017. Underlined type is used to indicate where IRS text has been updated. Places where text has been removed are indicated by the sentence: Text intentionally omitted.

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Ernst & Young LLP will update the EY Tax Guide 2018 website with relevant taxpayer information as it becomes available. You can also sign up for email alerts to let you know when changes have been made.

Introduction

Interest expense is the amount of money you pay for the use of borrowed money. Depending on the use of the borrowed funds, certain types of interest expense may be deducted from your income.

To calculate your deduction, you must first separate your borrowings into five categories: (1) amounts used for investments generating portfolio income (interest, dividends, etc.), (2) amounts used for investment in passive activities (see chapter 12, Other income), (3) amounts used to purchase or improve a personal residence, (4) amounts used in an active trade or business, ...