Do You Wish You Could Deduct Credit Card Interest?

credit debt to equity debt

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:

  • Education
  • 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.

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