Title:
A Bill to Allow Individuals to Deduct Credit Card Interest on Federal Income Taxes
Bill Number:
S. XXXX
Date Introduced:
November 7, 2024
Sponsor:
Senator Willoughby Lloyd
Purpose:
To provide tax relief to individuals by allowing the deduction of all interest paid on credit card debt from federal taxable income, retroactive for the past five years.
Section 1. Short Title
This Act may be cited as the “Credit Card Interest Deduction Act of 2024.”
Section 2. Findings and Purpose
(a) Findings:
Congress finds the following:
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American households carry significant credit card debt, often with high interest rates that compound financial strain.
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Current tax law does not permit the deduction of interest on credit card debt, impacting the financial well-being of individuals.
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Allowing a tax deduction for credit card interest would alleviate the debt burden for many Americans, enhance financial stability, and provide meaningful retroactive relief.
(b) Purpose:
The purpose of this Act is to amend the Internal Revenue Code of 1986 to allow individuals to deduct all interest paid on credit card debt, with retroactive effect for the past five tax years.
Section 3. Deductibility of Credit Card Interest
(a) Amendment to Internal Revenue Code:
Section 163 of the Internal Revenue Code of 1986 is amended by adding a new subsection:
- Subsection (h)(3)(E) - Credit Card Interest Deduction
• (i) For taxable years beginning after December 31, 2019, individuals may deduct from their taxable income the entire amount of interest paid on personal credit card debt.
• (ii) This deduction shall apply solely to interest paid on credit card debt incurred for personal, non-business expenses.
• (iii) To qualify, taxpayers must provide documentation of the amount of interest paid during the taxable year, including statements from credit card issuers.
Section 4. Retroactive Application
(a) Retroactive Deduction:
- Taxpayers may amend tax returns filed for any of the five preceding tax years (tax years 2019 through 2023) to claim the credit card interest deduction allowed under this Act.
(b) IRS Adjustment Window:
- The IRS shall allow taxpayers a three-year period from the date of enactment to amend past returns to claim the deduction retroactively.
Section 5. Reporting and Compliance
(a) Reporting Requirements:
- Credit card issuers shall provide an annual statement to each cardholder detailing the total interest paid for the year, which may be used for tax reporting purposes.
(b) IRS Guidance:
- The IRS shall provide guidelines and a standardized form for taxpayers to claim the credit card interest deduction, including retroactive claims.
Section 6. Effective Date
This Act shall take effect immediately upon enactment and apply retroactively for taxable years beginning after December 31, 2024