Tax deductibility of loan interest

So if you intend to claim a tax deduction, make sure the debt for investment is easily separated from the debt that is personal. This will make it clear what interest is deductible and what is not, which is important to know when completing your tax return.

For loan interest to be deductible, you need to expect to receive some income from the investment.

For example, if you bought a block of land as an investment and the land was not leased out, the interest would not be deductible on a year-by-year basis.

However, the interest may form part of your cost base when establishing what capital gains tax would be applicable if the land was sold. There is more on capital gains tax in the Tax and Structures module.

It can be of great value to discuss these matters with an accountant or taxation adviser.