Do You Wish You Could Deduct Credit Card Interest?
Shift Your Credit Debt to Tax Deductible Debt
The Mortgage Interest Deduction is available to homeowners for up to $1,000,000 of acquisition debt on the combination of their first and second homes. Interest can also be deducted on up to an additional $100,000 of Home Equity debt.
Acquisition vs Equity Debt
Acquisition Debt is used to buy, build or improve a principal residence. Home Equity debt can be used for any purpose. Consider using it for:
- Medical Expenses
- Purchase of a Car or Boat
- Consolidate Debts
- Pay off Credit Cards
Savings Are Considerable
A homeowner with $15,000 of credit card debt at 19% and sufficient equity in their home could replace it with a home equity loan at a much lower interest rate.
Not only would the interest rate on the home equity loan be about 1/3 of the rate paid on the credit card, it would now be tax deductible.
If this taxpayer were in the 28% bracket, the net interest on a 6.5% loan would be 4.68% after tax benefits are considered.
See for Yourself
Shifting personal debt to Home Equity debt can result in an interest deduction – and probably a lower interest rate. For more information, see IRS Publication 936, page 10, and consult your tax professional.
This is not intended to be tax or legal advice.