Topic no. 505, Interest expense

Interest is an amount you pay for the use of borrowed money. Some interest can be claimed as a deduction or as a credit. To deduct interest you paid on a debt, review each interest expense to determine how it qualifies and where to take the deduction.

When you prepay interest, you must allocate the interest over the tax years to which the interest applies. You may deduct in each year only the interest that applies to that year. However, an exception applies to points paid on a principal residence, see Topic no. 504 .

Types of interest deductible as itemized deductions on Schedule A (Form 1040, Itemized Deductions) include:

Investment interest (limited to your net investment income; see Publication 550, Investment Income and Expenses ) and

Qualified mortgage interest including points (if you're the buyer); see below.

Types of interest deductible elsewhere on the return include:

Student loan interest as an adjustment to income on Form 1040, U.S. Individual Income Tax Return or Form 1040-SR, U.S. Tax Return for Seniors (attach Schedule 1 (Form 1040), Additional Income and Adjustments to Income PDF ). See Topic no. 456 , Publication 970, Tax Benefits for Education and Can I claim a deduction for student loan interest?

Non-farm business interest (this may be limited). See Publication 334, Tax Guide for Small Business

Farm business interest. See Publication 225, Farmer's Tax Guide

Interest incurred to produce rents or royalties (this may be limited). See Publication 527, Residential Rental Property

Types of interest not deductible include personal interest, such as:

Interest paid on a debt incurred on or prior to December 31, 2024, to purchase a car for personal use.

Credit card and installment interest incurred for personal expenses.

Points (if you're a seller), service charges, credit investigation fees, and interest relating to tax-exempt income, such as interest to purchase or carry tax-exempt securities.