Interest Expenses

To oversimplify, if the interest expense is business related (and that includes, by way of example, rental property) it is deductible. Otherwise, on a personal level, and again as an oversimplification, only 3 types of interest are deductible – mortgage interest, investment interest and interest on student loans – and all are subject to different limitations. 

In the “old days”, you were able to deduct interest on personal car loans, credit cards, just about anything. That no longer (for quite a number of years actually) is allowed. Note that mortgage interest expense includes not only a first as well as a second mortgage, and also home equity lines – but there is an aggregate limitation that has complex rules. Also depending on when some of this debt came into existence, there are special limitations.

Without going into all the details, essentially you cannot deduct mortgage interest on debt that exceeds $750,000. Also, you can deduct investment interest – which essentially means interest expense on debt incurred to carry investments (think for instance a margin account). However, the deductibility of investment interest is, as a general rule, limited to the extent of investment income. Again, as an oversimplification, if the interest expense is part of a business situation (and that includes rental property), then the interest is fully deductible except when it isn't. There are some relatively new and very complex rules, as to when business related interest expense is not deductible.