During most people’s lives, they will at some point need to borrow money. For example, it could be a loan for a house, a car, a renovation, new electronics or something else entirely.
There are many different types of loans available. When you take out a loan, there will automatically be interest on the loan. The interest rate is calculated as a percentage and is the fee that you have to pay for the loan you have taken out. In other words, an interest rate is an additional expense on the loan.
This is how an interest deduction works
An interest deduction means that you have to pay less in Good Finance if you pay interest on a debt you have. It is a deduction designed to give you better terms when you take out a loan. If you have a home or mortgage loan, you have to pay less in Good Finance, because you have to pay interest on the loan.
The expenses you have in the form of interest are calculated automatically by Good Finance and they will be stated on your annual statement. Therefore, you do not have to enter all the information yourself on Good Finance’s website – it will be done for you.
How much can I get in interest deductions?
At present, the interest deduction is 33.6% for interest paid on loans under USD 50,000 and 27% for the total interest paid on loans over USD 50,000. This does not matter whether you pay top tax or not.
We have made an example of a loan where you can see what you will get in interest deductions in 2019. You can see that below.
Interest deduction example
It can be difficult to imagine the significance of an interest deduction. That’s why we’ve created an example for you so you can visualize how much you can save by deducting your interest. The deduction you receive for your interest on your loan can be deducted from Good Finance. This means you can get more money paid out a month because you have to pay less in tax. The example looks like this:
An example of an interest deduction might sound like this: You pay 12.5% in interest on a loan of USD 10,000 a month. Thus, your interest deduction is 33.6% of the 12.5% you pay in interest. This means that you can deduct 33.6% from the interest you pay on the USD 10,000.
Of the USD 10,000 you pay 12.5% per month in interest, which is equivalent to USD 1,250. Of the USD 1250, you can deduct 33.6% of your interest from Good Finance. This means that you receive an interest deduction of USD 420 a month. However, be aware that your interest rates are reported every 3 months.
Why can you get an interest deduction?
The interest deduction is made because it should make borrowers more secure when taking out a loan. If you take out a loan, you are guaranteed to receive part of the interest you pay on the loan.
This simply means that it is cheaper for you to take out the loan, as Good Finance gives you a deduction for parts of the interest. You are not only guaranteed interest deductions if you take a home loan through your bank. You are also eligible for the deduction if you take out a loan through a private loan provider. You can read more about that below.