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What interest payments can I deduct? (2011)

Whether or not you can deduct interest payments on a loan depends on what the loan is for and sometimes how the loan is secured. Here’s a list of what is deductible and where you take the deduction:

You can deduct: Report the
deduction on this
form or schedule:
1. Interest on debts taken out for business
Schedule C
2. Interest on student loans (special rules and limits
Form 1040 (worksheet
is provided in the
3. Margin interest (up to the amount of interest,
dividend and other investment income you have)
Form 4952
4. Home mortgage interest on your primary
Schedule A
5. Home mortgage interest on your secondary
residence or vacation home
Schedule A
6. Home equity loan interest (to the extent that the
loan doesn’t exceed $100,000)
Schedule A
7. Interest on loans you take out to buy property to
hold as an investment (such as land, securities,
Form 4952
8. Points paid when you buy a house Schedule A
9. Points paid when you refinance your home loan
(deducted ratably over the life of the loan)
Schedule A
10. Interest you pay on loans to purchase property
that you rent to others
Schedule E
11. Interest on debts taken out for farming operations Schedule F or Form
12. Redeemable ground rent (lease payments made
for the use of land) if the lease term is for more
than 15 years and you meet certain other criteria
Schedule A
13. Construction loan interest where you use the
proceeds to buy a building lot (provided you meet
certain requirements)
Schedule A
14. Timeshare loan interest in which you own the
property (fee simple or deeded) as a vacation
Schedule A
15. Boat loan interest if the boat has basic living
accommodations and serves as a vacation home
Schedule A
16. Mobile home loan interest if it serves as a
vacation home
Schedule A
You can’t deduct the following types of interest:

  1. Credit card finance charges and interest (except on purchases made either for your business or for property you rent out)
  2. Car loan interest (unless your car is used in your own business)
  3. Interest on loans for personal purchases
  4. Interest on loans for purchasing tax-exempt securities
  5. Interest on a loan for making a down payment on a house, unless the loan is secured by the home itself
  6. Interest assessed on unpaid tax liabilities