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Debt Handling - Consider Tax Implications In Your Debt Calculations
from:When analyzing financing options or debt handling issues many people neglect to include the tax implications of one strategy over another. Including tax implications in your scenarios can become very complicated. It's always handy to have a computer program that will help you. But even without that there are a few simple guidelines to keep in mind.
In the U.S., the biggest tax write-off for many individuals is the interest paid on a property loan. Since they represent large debts, paid over many years, the interest is (for several years) the overwhelming majority of the total monthly payment. As a result, much of that interest paid can offset taxable income.
But there are other tax issues involved with other forms of debt that should be factored into planning.
Taking out a home equity loan used to be primarily for the purpose of making improvements to the property. Many people these days use that money for a much wider variety of goals. A HELOC (Home Equity Line of Credit) can be used to finance just about anything - an auto purchase, repayment of credit card debt... you name it.
One advantage of this type of debt is precisely the tax benefit. Just as with a primary loan, interest on a second mortgage or a HELOC is tax deductible. So, even when the interest rate is the same as a credit card (and they are often lower), the net result can be beneficial.
The only way to know for sure in your circumstances is to do the calculations. Online loan calculators are readily available that will help you do just that. Run through several scenarios to decide the effect in your case.
It's possible to obtain a loan to pay for large medical costs. Some people pay for such things with a credit card, which is possibly the most expensive way to finance the debt. Sometimes that's necessary; no 'one-size-fits-all' recommendation is possible.
Since much of the interest on such loans, and sometimes the medical expenses themselves, is tax deductible it can be worthwhile to finance the costs that way.
Interest on or amount paid to student loans, too, is tax deductible up to a point. Your circumstances will vary from another's. Tax filing software is probably your best bet for calculating the pros and cons in your individual case. As you answer the 'interview questions' you can put in the amounts and follow the tutorial to determine the impact.
Whatever the example, whenever you are considering assuming debt - especially for large amounts - taking the time to evaluate the tax implications can save you substantial amounts of money. That can easily be worth a couple of extra hours of research, especially since you'll be able to use that knowledge time and time again.
Debt Consolidation Equity Loan News
Till debt do us part - Irish Times
Till debt do us part Irish Times, Ireland - While it may well result in one lower monthly repayment, over the life of the loan it is likely to cost you more. If your debt consolidation loan is secured ... |
10-Q: NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP /DC/ - MarketWatch (press release)
10-Q: NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP /DC/ MarketWatch (press release) - During the six months ended November 30, 2008, there was significant market activity to issue the debt required to fund new loan advances, ... |
Debt Consolidation Options | Payday Loans, Home Equity Loans etc. - Personal Money Store Blog
Debt Consolidation Options | Payday Loans, Home Equity Loans etc. Personal Money Store Blog, WA - Does debt have you bound up and looking for a key to relief! Try consolidating your debt with a home equity loan. Payday Loans, although a valuable service ... |
KB Home Q4 2008 (Qtr End 11/30/08) Earnings Call Transcript - Seeking Alpha
KB Home Q4 2008 (Qtr End 11/30/08) Earnings Call Transcript Seeking Alpha, NY - Our consolidation strategy focused on maintaining strong primary divisions with smaller satellite business units to help service a wide area. ... |
Refinancing tips offered in Billings - Montana's News Station
Refinancing tips offered in Billings Montana's News Station, MT - In figuring out what rate you'll pay, lenders look at three things -- your credit score, debt to income ratio, and loan amount compared to value. ... |