Did you know that when you borrow money you could also be reducing the amount of income taxes you have to pay to the government? Surprisingly, not all loan programs are equal when it comes times to look at your tax situation. Just about everybody wants to borrow money from time to time and it's smart to do your research before diving into a big loan commitment. Many loans may give you a tax credit which shrinks the yearly tax you owe and other types of loans can give you a tax deduction which lowers your taxable income. Here's a simple guide to which loans may qualify you for a tax credit, though obviously individual cases will be different.
School Loans: The interest you pay on most student loans can only be deducted if you make under a certain amount of money, based on your individual filing status. Did you know that some loans you take out for education could give you a tax advantage? You can, in many cases, deduct the interest you paid on the loan from your income taxes. Not all education loans are eligible for this, but it's a good way to decrease the taxes you pay, especially if you're a struggling student with a limited income.
House Mortgages: For many people their home is the largest purchase they ever make, and paying a home loan can actually be a good way to reduce the amount of cash you owe on your income taxes each year. Most home loans are designed so that you can deduct the amount of interest you pay on the loan every year. Out of all the loans that have tax deductions associated with them, house mortgages are probably the most well-known. Since most home loans are set up to be paid over thirty years, that means that buying a home can give you 30 years of potential tax deductions.
Home Equity Loans: If your house is more valuable now than when you bought it then you might be able to take out a home equity loan (sometimes called a HELOC) and deduct the interest you pay on that loan. There are some restrictions about how much of your loan's interest actually qualifies for a tax deduction. You can use a home equity loan for a number of things, you may be able to get additional tax credits by using the money for home upgrades. In some case you can even earn tax savings for using the money to improve your home's energy efficiency. A home equity loan used to improve your dwelling could eventually increase the value of your house and give you even more equity over time. For some people some of the cost of a home equity loan can be offset with home remodeling tax deductions.
Before you apply for any of these loans you may want to talk with your tax professional to make sure the tax benefits apply to your individual situation. There are, of course, a lot of variables between these loans. Everyone will not be eligible for all the different tax deductions that these loans may offer. Sometimes your age, the amount of money you want to borrow and the reason of the loan will limit the amount of money you can deduct from your taxes in any given year. Sometimes taking out the right kind of loan can definitely save you thousands of dollars on your income taxes, so it's worth spending a little bit of time and energy to look into what sort of tax credits you qualify for. - 31393
School Loans: The interest you pay on most student loans can only be deducted if you make under a certain amount of money, based on your individual filing status. Did you know that some loans you take out for education could give you a tax advantage? You can, in many cases, deduct the interest you paid on the loan from your income taxes. Not all education loans are eligible for this, but it's a good way to decrease the taxes you pay, especially if you're a struggling student with a limited income.
House Mortgages: For many people their home is the largest purchase they ever make, and paying a home loan can actually be a good way to reduce the amount of cash you owe on your income taxes each year. Most home loans are designed so that you can deduct the amount of interest you pay on the loan every year. Out of all the loans that have tax deductions associated with them, house mortgages are probably the most well-known. Since most home loans are set up to be paid over thirty years, that means that buying a home can give you 30 years of potential tax deductions.
Home Equity Loans: If your house is more valuable now than when you bought it then you might be able to take out a home equity loan (sometimes called a HELOC) and deduct the interest you pay on that loan. There are some restrictions about how much of your loan's interest actually qualifies for a tax deduction. You can use a home equity loan for a number of things, you may be able to get additional tax credits by using the money for home upgrades. In some case you can even earn tax savings for using the money to improve your home's energy efficiency. A home equity loan used to improve your dwelling could eventually increase the value of your house and give you even more equity over time. For some people some of the cost of a home equity loan can be offset with home remodeling tax deductions.
Before you apply for any of these loans you may want to talk with your tax professional to make sure the tax benefits apply to your individual situation. There are, of course, a lot of variables between these loans. Everyone will not be eligible for all the different tax deductions that these loans may offer. Sometimes your age, the amount of money you want to borrow and the reason of the loan will limit the amount of money you can deduct from your taxes in any given year. Sometimes taking out the right kind of loan can definitely save you thousands of dollars on your income taxes, so it's worth spending a little bit of time and energy to look into what sort of tax credits you qualify for. - 31393
About the Author:
Need to learn more about the details of home loans? Check out our site to learn more about modifying a mortgage, upside-downmortgages and the home buyer tax credit extension.
