- Days left

Tax Tips: Use a home equity loan to pay off credit cards

Experts will tell you not to run up the balance on your credit cards because you will pay dearly when it comes time to calculate the interest. But the fact is that many consumers do have credit card debt that is carried over from month to month.

Here's a way to reduce your taxes and probably save some interest in the process. Use a home equity loan to pay off your credit cards. (But be sure to cut up the cards and not begin accumulating a balance again!)

There are two advantages to carrying your debt as a home equity loan: First, the interest on a mortgage or home equity loan is generally deductible on your taxes if you itemize, while the interest on a credit card is not deductible. So you'll get a small reduction in your taxes for the interest on that loan. Second, home equity loans generally have lower interest rates than credit cards, so you can save yourself some money.

There are limits to the amount of mortgage interest that is deductible, so check the rules before you do this. The deduction is also only available for your first or second home, so you won't be able to do this on other properties you might own. This tip also won't help you if you are affected by the Alternative Minimum Tax.

As with any tax tip, check the rules before you act.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.

Learn about investing from the comfort of your own home.

Portfolio Basics

Take the first steps to building your portfolio.

View Course »

Investment Strategies

Learn the strategies you need to build a winning portfolio

View Course »

TurboTax Articles

5 Tax Tips for Single Parents

Filing taxes as a single parent requires coordination between you and your ex-spouse or partner. Usually the custodial parent claims the child as a dependent, but there are exceptions. A single parent is allowed to claim applicable deductions and exemptions for each qualifying child. Even though you claim your child as a dependent, she may still have to file her own tax return if she has income, such as from an after-school job.

Affordable Care Act Decoded

The health care reform law known as the Affordable Care Act may directly affect your tax liability. Many taxpayers are familiar with the requirement that most Americans either carry health insurance or pay a tax penalty. But that's just one provision, and knowing what else is in the law can help you avoid surprises come tax time.

Cost of Taking the Wrong Tax Deductions

Taking the wrong tax deductions can cost you time and money. If you're depending on a tax refund, a tax return that is improperly filed can keep you waiting for a long time. You may also get back less than you expected. If the Internal Revenue Service suspects errors or requires proof of deductions, you may be asked to provide back-up documents to prove your numbers and amend the return. "If the IRS requires further information," advises Bill Symons, president of Computer Accounting Services in Oswego, N.Y., "You'll receive an official request by mail. Normally the situation is easily rectified, but it can delay refunds by up to 10 to 11 months."

5 Steps to Navigate the Healthcare Marketplaces

To navigate the Health Insurance Marketplace, you have to know what you want from a health plan. Have your previous plan handy to make comparisons, as well as household and income information. If this is your first health plan, be aware of your needs and know your tax situation. Eligibility depends on the size of your family and combined income from all sources.

Add a Comment

*0 / 3000 Character Maximum