With the prices of things rising, jobs tight, and investments performing weakly, it seems that every paycheck is stretched to the limit. We often choose or are forced to rely on credit to pay for the things we want or need. Whether you are a borrower or a lender, you may be eligible for tax breaks with respect to loan activities.
This chapter explains the tax rules related to borrowing money. For more information, see IRS Publication 550, Investment Income and Expenses, and IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments.
If you are a homeowner repaying a mortgage, you can deduct the interest portion of your payments. There is no dollar limit on how much interest you can deduct. However, the law limits the amount of borrowing you can take into account in figuring your deductible interest on loans taken after October 14, 1987.
For acquisition indebtedness to buy, build, ...