Interest on a pension loan is not deductible, unless it falls into one of the following categories:.
Types of interest deductible as itemized deductions on Form 1040, Schedule A (PDF), Itemized Deductions, include:
- Investment interest (limited to your net investment income) and
- Qualified mortgage interest including points (if you're the buyer); see below.
Types of interest deductible elsewhere on the return include:
- Student loan interest as an adjustment to income on Form 1040 (PDF) or Form 1040A (PDF), U.S. Individual Income Tax Return. For more information, refer to Topic 456, Publication 970, Tax Benefits for Education, and Can I Claim a Deduction for Student Loan Interest?
- Non-farm business interest. See Publication 334, Tax Guide for Small Business, and Publication 535, Business Expenses
- Farm business interest. See Publication 225, Farmer's Tax Guide, and Publication 535
- Interest incurred to produce rents or royalties (this may be limited). See Publication 527, Residential Rental Property, and Publication 535
Types of interest not deductible include personal interest, such as:
- Interest paid on a loan to purchase a car for personal use.
- Credit card and installment interest incurred for personal expenses.
- Points (if you're a seller), service charges, credit investigation fees, and interest relating to tax-exempt income, such as interest to purchase or carry tax-exempt securities.
