woodwrkrz wrote:

- quote -


Well, first of all, you have to be able to qualify to
itemize expenses or it's a no go so we can assume that.
Second, there are limits on the amount of interest you can
deduct if (as in your case) the proceeds of a mortgage loan
are used for purposes other than for the
house/improvements/etc. This was $100k in 2005 for married
filing jointly. There are other limits possible if the
overall amounts of the mortgage(s) total $1M or more.

If neither limit applies, then the amount you get returned
is the marginal tax rate of the amount of interest paid
which has the net effect of making the interest rate (say)
82% of the actual rate. So the effective rate of 7% would
be roughly 5.75%. The difference less than that would be
the lower marginal cost. This assumes, of course, that the
other rates can be kept at their lower values through the
period of the loan and ignores any other ancillary fees.

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

I have several college age children and i am trying to find
out if anyone has ever come up with a table or formula which
will show me the best way to structure loans in the context
of tax deductibility and least final cost. Currently for me
the least expensive credit available is thru promotional
credit card offers.....typically 3.99 to 4.99% until the
balance is paid. A 3 year fixed home equity line of credit
runs about 6.99% and the government "Plus" student loan rate
is about 8.25%. I would like to determine which loan is the
best for me and where the "break-even" point is for non
deductible interest sources. Obviously the final answer
will have to be predicated on my marginal tax rate which for
sake of this discussion we will assume is 18%. I really
dont know what it is and the ideal solution to my question
would be some kind of table / spreadsheet that allowed the
user to plug in some answers to a few questions and then it
would spit out the best decision. Thanks for any useful
input. Please, i understand all the fine print about
credit card promotions so lets not go there.

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >