Interest rates are on the rise, albeit slowly. Still, individuals and businesses with debt can reduce the cost of borrowing if they can deduct their interest payments. The tax law has a patchwork quilt of rules for deducting interest. Some of the rules have been changed by the Tax Cuts and Jobs Act of 2017 (TCJA), while other rules remain unchanged. Here is a roundup of the rules for deducting interest payments.

Determining the Type of Interest

The tax law has various rules for deducting interest, depending on the type of interest involved. There are six categories:

  • Personal interest
  • Qualified residence interest
  • Student loan interest
  • Investment interest
  • Passive activity interest
  • Business interest