Interest that you receive is taxable in the same way as if you had received interest from any other source. Interest that you pay depends on whether you have laid out funds for the purpose of earning income or not, and paying a shortfall in your income taxes and incurring interest expense on that is not considered money borrowed for the purposes of earning income. It's a tax liability, and that's after you have determined your income. So the upshot of it is it's not income.
On April 22nd, 2010. See this statement in context.