Just about everyone needs to borrow money from time to time and it makes sense to do your research before jumping into a big Loan commitment. Did you know that when you take out a loan you could also be reducing the amount of income taxes you have to pay at the end of the year? Surprisingly, not all loans are the same when it comes times to pay your taxes. Many loans may give you a tax credit which shrinks the income tax you owe and other types of loans can give you a tax deduction which reduces your gross taxable income. Here's a simple guide to which loans may give you for a tax deduction, though obviously everyone's tax situation will be different.

Student Loans: The interest you pay on most education loans can only be deducted if you make under a certain amount of money, based on your individual filing status. Did you know that many loans you take out for school could give you a tax advantage? You can, in many cases, deduct the interest you paid on the loan from your federal taxes. Not all school loans are eligible for this, but it's a good way to decrease the taxes you pay, especially if you're a cash-strapped student with a limited income.

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

Home Equity Loans: If your house is more valuable now than when you bought it then you might be able to take out a home equity loan (sometimes called a HELOC) 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 variety of things, you may be able to get additional tax credits by using the money for home improvements. In some case you can even get tax savings for using the money to improve your house's energy efficiency. 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. For many people part of the cost of a home equity loan can be offset with home improvement tax deductions.

Sometimes taking out the right kind of loan can definitely save you thousands of dollars on your income taxes, so it's worth investing a little bit of time to look into what sort of tax deductions you qualify for. There are, of course, a lot of differences between these loans. Everyone will not be eligible for all the different tax deductions that these loans may offer. Sometimes your income, 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 take out any of these loans you may want to speak with your tax professional to make sure the tax benefits apply to your individual situation.