Debt Deductions: Does Borrowing Give You a Tax Writeoff?

Some types of interest are deductible, while others aren't. Figure out which ones are here.

Feb 16, 2014 at 2:10PM

It's tax time, and everyone's scurrying to find deductions on their returns. If you have loans outstanding, the interest you pay might be tax-deductible -- but it might not. How can you tell?

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, goes through the various types of debt and whether you can write off interest. Dan notes that mortgage debt is almost always deductible as an itemized deduction, with amounts up to $1 million. That's a big benefit for mortgage lenders Bank of America (NYSE:BAC) and Wells Fargo (NYSE:WFC), as it encourages borrowing that might not otherwise happen. Dan also points out that home equity loans are often deductible, although subject to a smaller $100,000 limit in many cases. Dan turns to investment-related interest, noting that it's deductible to the extent that it produces taxable investment income. Investing in iShares National AMT-Free Muni ETF (NYSE MKT:MUB) or other tax-exempt investments, however, doesn't allow you a deduction. Student loan debt is deductible for some people below applicable income limits, and the advantage it has is that you don't have to itemize to take a deduction if you qualify. Meanwhile, personal loans like car loans and credit cards don't qualify for deductions, leaving automakers Ford (NYSE:F) and General Motors (NYSE:GM) at a disadvantage to banks and homebuilders because of the lack of an equal tax break.

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Dan Caplinger owns warrants on Bank of America and Wells Fargo. The Motley Fool recommends Bank of America, Ford, General Motors, and Wells Fargo and owns shares of Bank of America, Ford, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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