- Days left
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.

Increase your money and finance knowledge from home

Timing Your Spending

How to pay less by changing when you purchase.

View Course »

Introduction to Retirement Funds

Target date funds help you maintain a long term portfolio.

View Course »

TurboTax Articles

How Does IRS Form 1095-B Affect Small Businesses?

IRS Form 1095-B provides information about health insurance coverage. The Affordable Care Act (ACA), also known as Obamacare, requires that insurance providers send this form to those whose coverage meets the minimal standards of the law.

Tax Tips for Job Hunters

It's been said by many that looking for a job is a job in itself. The Internal Revenue Service (IRS) allows the deduction related to some costs of job hunting, the same way employees can deduct some unreimbursed job expenses. Not all job searches qualify, though, so it's wise to educate yourself on the rules.

What is Form 1095-C: Employer-Provided Health Insurance Offer and Coverage

The Affordable Care Act, or Obamacare, requires certain employers to offer health insurance coverage to full-time employees and their dependents. Further, those employers must send an annual statement to all employees eligible for coverage describing the insurance available to them. The Internal Revenue Service (IRS) created Form 1095-C to serve as that statement.

What is Form 1098-E: Student Loan Interest Statement?

If you paid interest on a qualified student loan, you may be able to deduct some or even all of that interest on your federal income tax return. Student loan companies use IRS Form 1098-E to report how much you paid in interest. Borrowers get a copy of this form, and so does the IRS.

Add a Comment

*0 / 3000 Character Maximum