M-MTax
Level 12

Business & farm

You take out a home loan for $250K. In the first year you make payments totaling $20K, of which $15K of those total payments are interest. The 15K of interest is deductible. The $5K you paid towards the principle balance is not deductible.

EXACTLY! The $15k of interest is deductible. The $5k paid toward principal is NOT deductible BUT it is also NOT taxable......big difference.