Surprisingly, not all money borrowing programs are equal when it comes times to pay your taxes. Did you know that when you take out a loan you could also be shrinking the amount of taxes you have to pay at the end of the year? Some loans may give you a tax credit which shrinks the yearly tax you owe and other types of loans can give you a tax deduction which reduces your taxable income. Just about everybody needs to borrow cash from time to time and it makes sense to do your homework before diving into a big loan. Here's a simple guide to which loans may give you for a tax credit, though obviously everyone's tax situation will vary.

Student Loans: You can, in many cases, deduct the interest you paid on the loan from your income taxes. Not all student loans are eligible for this, but it's a good way to reduce the taxes you pay, especially if you're a struggling student with a limited income. The interest you pay on many education|school|student loans can only be deducted if you make under a certain amount of money, based on how you file your taxes.

Home Mortgages: Out of all the loans that have tax deductions associated with them, house mortgages are probably the most talked about. Most house payment plans are designed so that you can deduct the amount of interest you pay on the loan every year. Since most house mortgages are designed to be paid over 30 years, that means that purchasing a home can give you 30 years of possible tax benefits. For most people their home is the largest purchase they ever make, and paying a home loan can actually be a good way to reduce the amount of money you owe on your income taxes each year.

Home Equity Loans (HELOC): A home equity loan used to improve your house could eventually increase the value of your dwelling and give you even more equity over time. If your house is more valuable now than when you bought it then you might be able to take out a home equity loan and deduct the interest you pay on that loan. There are some restrictions about how much of your loan's interest actually qualifies for a tax benefit. You can use a home equity loan for a number of things, you may be able to get additional tax credits by using the money for house upgrades.

Sometimes applying for the right kind of loan can definitely save you thousands of dollars on your income taxes, so it's worth spending a little bit of time to look into what sort of tax deductions you are eligible for. There are, of course, a lot of variables between these loans. Not everyone will be eligible for all the different tax deductions that these loans may offer. Sometimes your living situation, the amount of money you want to borrow and the reason of the loan will limit the amount of money you can deduct from your taxes in any given year. Before you apply for any of these loans you may want to talk with your tax professional to make sure the tax benefits pertain to your individual situation.