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Interest deductions are one of the many deductions that taxpayers can use on Schedule A. The schedule is part of the 1040 form. If you are eligible for the deduction, your overall tax rate can be reduced.
Types of Interest Deductions
There are various forms of interest that you can declare on the itemized deduction paperwork. These are:
- Home mortgage interest - The interest you paid on both first and second residence mortgage are eligible for deduction. It also includes some of the closing costs fees used to refinance mortgages. Also, you can typically write off mortgage insurance premiums and monthly payments.
- Investment interest - Any interest you paid for a financial loan you made for the purpose of using the finances to capitalize an investment that generates dividends, interests or capital profits.
- Student loan interest - The interest accrued on any qualified student loan to further higher education and other related educational expenses like tuition fees, board and lodging, books, projects, course-related school supplies and equipment.
Interest Not Qualified for Deductions
Interest accumulated on certain loans used for personal purposes like credit cards, money used for vacations or purchase personal luxuries, are not credited as a qualified deductions. Be sure to check with a qualified tax advisor or preparer for more information.
