Understanding the Five Tax Buckets for Interest Rates

ARTICLE | April 21, 2025

Interest rates frequently shift due to market conditions, yet, when it comes to taxes, the fundamental rules on deducting interest expenses stay relatively consistent unless there is a legislative change. The Tax Cuts and Jobs Act of 2017 (TCJA) introduced important adjustments to these rules, but the underlying concepts have remained in place for many years. Recognizing how to categorize interest expenses and which “bucket” each belongs in can make a considerable difference when you are preparing your return. Knowing which deductions you may claim helps minimize your overall tax burden in a constantly changing economic environment.

Read the full article here.

While interest rates can rapidly change, the underlying rules for deducting interest remain relatively steady, barring new legislation. For individuals and businesses alike, the ability to properly categorize interest can lead to meaningful tax savings. Whether you are a homeowner navigating the difference between mortgages and home equity lines, an investor seeking to offset your interest costs with investment income, a business owner managing debt, or a student loan borrower tackling education expenses, understanding these distinctions is critical.

Our firm provides the information for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. This article is not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.