Ok, does this mean that if I pay $1,000 in interest for my American made car, and owe $1,000 in income taxes, I will not owe any income tax? Or, does this mean the $1,000 I paid in interest on my American made car [insert IRS math here] means I can deduct $10 from the $1,000 in income taxes I owe?
Ok, does this mean that if I pay $1,000 in interest for my American made car, and owe $1,000 in income taxes, I will not owe any income tax? Or, does this mean the $1,000 I paid in interest on my American made car [insert IRS math here] means I can deduct $10 from the $1,000 in income taxes I owe?
If you paid $1000, I think it means you claimed to make $12,500 in income.
You subtract $1000 from $12,500 (or whatever that marginal bracket rate is) and pay 8% on $11,500, so $920 instead of $1000.
(Edit: The current low bracket is 10% on $0-$11,600, and 12% after that, but I’m sticking with 8% flat to $12,500)