Would it be better to finance a car with my heloc @ 9% since interest can be deducted or get a 4% car loan?
Answers:
The interest on a heloc is not fully deductible--there are limits. In addition, it doesn't do you any good unless you are itemizing your deductions instead of taking the standard deduction; and unless you're in a tax bracket where you're paying a 50% tax rate (unlikely!) the savings will not bring you down to the 4% standard car loan rate you mention. I think the interest is deducted from gross income, not from your taxes. If that is true, here's how it will work: Let's say you're in a 25% tax bracket, so that you will pay 25 cents in taxes for every $1 of income. If the annual interest on the car at 9% is $5000, and you deduct the $5000 from your income, the heloc tax deduction savings to you will be .25x$5000=$1250 per year, so you will pay interest of up to $3750 after tax benefits. However, a 4% loan, with no tax deduction, would cost you less than half of the 9% interest, or approximately $2200 per year. That's my best guess, I'm not a tax lawyer.
Take the 4% car loan
take the 4% car loan. Don't risk your house on something that stupid.
The HELOC will adjust and be more than 9% over time.
The tax deduction for the HELOC interest is nothing compared to paying half of the interest rate on the traditional loan.
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