Is Credit Card Interest Deductible?

Here’s another common credit-related question: “Is credit card interest deductible?”

We Americans are constantly looking for new ways to offset our taxes each year, but unfortunately writing off your credit card interest is not one of them.

The Tax Reform Act of 1986 wiped out this option, along with interest on all other personal loans; the only exception is the mortgage interest tied to a primary or secondary home.

The reason being that homeownership is perceived as a positive thing, and is thus incentivized in a number of ways.

Credit card debt, on the other hand, isn’t seen in quite the same light, though you could argue that it keeps the economy moving along these days, for better or worse.

I suppose the big difference is that credit card interest is generally the result of overspending, while mortgage interest is typically unavoidable unless you’ve got tons of spare cash lying around.

Additionally, if consumers were allowed to deduct credit card interest, they’d possibly hold onto larger balances and make fewer payments.

Knowing the interest could be deducted in April, credit card holders might also spend more, as there would be little downside assuming they itemized their returns.

You could also argue that making credit card interest deductible would help those in debt get back on their feet quicker, but who’s to say what would really happen in reality.

Plus credit card issuers would likely raise interest rates if the law changed, so it’s a bit of a Catch-22.

If you are currently paying interest on your credit card(s), look into transferring a balance to a low fixed rate credit card or a 0% APR credit card.

Alternatively, you can also ask your card issuers to lower your interest rate(s) through via a little old-fashioned negotiation.

Also check out my article on which credit card to pay off first.

Related Topics:

1. Charitable Donations Using Credit Card Points Aren’t Tax Deductible
2. How Can I Lower My Credit Card Interest Rate?
3. Lower Your Credit Card Interest Rate
4. Don’t Pay Credit Card Interest
5. How to Pay Off Credit Card Debt