Taxpayer asks:
Thank you for taking my question. I do not know who else to ask. This is the first year for me to file taxes and I do not see where to put the interest that I paid on my credit card. I live with my grandmother and she says I can take it off my taxes. Thanks.
Taxgirl says:
Eke, I hope your grandmother doesn’t have a credit card! Credit card interest used to be deductible “back in the day” but the deduction was eliminated by Reagan. The 1986 tax bill was part of a sweeping set of changes introduced during the Reagan era which changed the way that Americans thought about borrowing. Deductions for almost all individual consumer debt – except for home mortgages and home equity loans – were eliminated.
Interestingly, when this happened, economists warned that it would single-handedly destroy the markets by cutting consumer spending. That never happened. For good or for bad, individual consumer spending on credit is at all time high, almost 25 years after the deduction was cut.
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
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Hi TG –
I’m a tax attorney in Minneapolis. Just a small correction. Reagan didn’t actually propose to eliminate deductibility of consumer interest in his tax reform proposal. He would have capped it at $5,000 plus investment income. Congress (specifically the Senate) actually proposed elimination of the deduction during their deliberations.
Thanks for the clarification.
Maybe she could start a home business file a schuldule E and deduct the interest
A meant a schedule c