Interest deduction

The interest deduction reduces the amount of a taxpayer's income that is subject to tax. The deduction can be taken when the taxpayer has incurred certain types of interest expense. The deduction is intended to encourage home ownership, since the deduction can be taken on the interest associated with home mortgages and home equity loans. The deduction is only available when a taxpayer is itemizing deductions on his or her tax return. Interest is also deductible on the interest cost incurred on a margin account, but only to the extent that it offsets net investment income.