Some interest payments are not deductible. Certain expenses similar to interest also are not deductible. Nondeductible expenses include the following items.
- Personal interest (discussed later).
- Service charges (however, see Other Expenses in chapter 28).
- Annual fees for credit cards.
- Loan fees.
- Credit investigation fees.
- Interest to purchase or carry tax-exempt securities.
You cannot deduct fines and penalties paid to a government for violations of law, regardless of their nature. taxmap/pub17/p17-126.htm#en_us_publink1000173320
Personal interest is not deductible. Personal interest is any interest that is not home mortgage interest, investment interest, business interest, or other deductible interest. It includes the following items.
- Interest on car loans (unless you use the car for business).
- Interest on federal, state, or local income tax.
- Finance charges on credit cards, retail installment contracts, and revolving charge accounts incurred for personal expenses.
- Late payment charges by a public utility.
You may be able to deduct interest you pay on a qualified student loan. For details, see Publication 970, Tax Benefits for Education.