They’re both too high, right? But your debts may actually help keep the evil twin at bay. Why? At least some of that interest you shovel out each month is probably tax-deductible. Back in “the good old days,” taxpayers were allowed to deduct all their interest charges, even credit-card bills for vacations, Armani suits and movie tickets. Then, Congress caught on.
Now the Tax Code permits deductions only for certain varieties of interest. This makes debt management more important than ever, because you are basically penalized by the IRS whenever you have interest that falls into the nondeductible category. Here’s a quick summary on when you get a tax break for borrowing and when you don’t.
You are allowed an itemized deduction for interest on up to $1...