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.