Which is better 6.51% interest on car loan, or 7.9% on deductiable home equity?
How do you calculate how much tax savings there is by deduction the interest?
Answer
You have to know your income tax bracket to do an accurate calculation, but i can show you an example:if you are in the 25% bracket, you multiply 7.9% by 75% to find out how much interest you are paying when taking the deductibility into account. so 7.9% deductible equates to 5.9% non-deductible (in the 25% tax bracket).
