I have the financial ability to pay off my six figure law school loans within five years. I hate debt and want to pay it off quickly. However, I've been advised to draw it out over 30 years for the tax deduction. Is that really that much better?
2007-10-04 05:13:22 · 3 answers · asked by Jes222 1 in Business & Finance ➔ Personal Finance
You never want to pay interest just to get a tax deduction. Assuming a combined federal and state income tax rate of 33%, each $1000 in interest paid saves you $333 in taxes. You are still $667 in the hole.
If you have the ability, pay it off.
2007-10-04 05:19:46 · answer #1 · answered by Wayne Z 7 · 0⤊ 0⤋
Pay it off. The tax deduction argument is like saying that you can save $2 on the left but have to spend $5 on the right. Get rid of these payments.
This argument is not the same as the mortgage question. In this case, having a mortgage is a good alternative to renting since you can deduct your interest - not your landlords.
2007-10-04 05:36:38 · answer #2 · answered by Jay P 7 · 0⤊ 0⤋
you have to calculate how much interest you will be spending if you draw it out. Chances are you will be paying more by drawing it out.
Personally I would pay it off...you can buy a house or something else will the extra money then and still be able to use it for tax deductions. I hate having debt also!
2007-10-04 05:18:49 · answer #3 · answered by Anonymous · 1⤊ 1⤋