What is ‘Good debt’? Deductible vs Non deductible debt
At RP Wealth Management, we always review our client’s debt and educate them on the difference between the net cost of deductible debt versus non- deductible debt.
Common examples of ‘non-deductible debt’ include taking out a home loan to purchase a property you intend to live in or paying personal expenses with your credit card.
Deductible debt includes interest on borrowings which can be offset against your taxable income which as a result reduces your overall taxable income eg. An investment property with a loan attached that is rented out.
The worst would be non-deductible debt and is debt that you pay down and receive nothing back in terms of tax deductions.