Alright, so you have finally graduated and have gotten yourself to a level that your income overall has become sustainable. This is a great time in your life and should not simply be seen as the point where you finally start to relax and not care what happens to your money. We at Torrance Cash Advance Loans can help your whole life with additional cash needs, so why wouldn’t you continue that thinking in order to get ahead even more in life?
Student loan debt is more of a marathon than a sprint. That in itself is more of an understatement than anything else which can still describe the situation at hand. In other words, if you still owe some tens of thousands of dollars towards your education and you don’t quite have the funds to pay it all off in a short period of time, then do you really want to continue living like a college student? If you have almost no money to put forth for personal expenses, then it might be extremely difficult to get up and put your nose to the grindstone day after day after day. However, there are some ways that you could put a lot more money into your student loans in order to eliminate that massive debt (or at least scale it back over time) while still being able to benefit in the short run.
The current standards according to personal income tax laws state that if you make up to $60,000.00 per year (or $120,000.00 for a couple that is married and filing jointly), then you are actually eligible to write off up to $2,500.00 of your student loan interest per year. Does this really make a difference overall? It definitely could!
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Let’s take a look at the simple situation below in order to further understand why you are able to take advantage of the tax laws and actually position yourself further out than you would be able to without this deduction.
Just for simplicity sake, let’s assume a few of the following things:
Tax Rate: 25%
Income: $60,000.00 Annually
Maximum Deduction Rate: $2,500.00
So with these few simple figures, we can already see that an individual is able to put the equivalency of one half of a month’s salary of an entire year into paying off their student loan debt, they will already be making a $2,500.00 decrease on their loan and interest. Furthermore, because they are able to write off the extra $2,500.00 from their total income due to the interest paid on student loans tax law, they are more or less able to work a half of a month in this scenario tax free!
If the individual has already paid their taxes ahead of time, then we can calculate a simple real value to see what benefit they would gain by doing the following: Take the simple tax rate of 25% and multiple it by the total deduction of $2,500.00. This rate represents the amount of tax that the individual would have paid on that $2,500.00, but is now able to get back due to the tax free stipulation. The calculations show that the individual was actually able to get back an extra $625.00 for (more or less) free, simply by focusing on their student loan debt!
Thinking about this from a few other points of view you can see that this is far from chump change! On a salary that pays $60,000.00 per year, this figure represents half of a week’s salary paid to you tax free! This also represents the rent for some apartments, or even (if nothing else) a great amount of cash to spend on personal expenditures. Who really wants to toss away over six hundred dollars anyway?
But what if you were actually making less than $60,000.00? What if this is one of your first few years out of college and you were actually making half of that? Let’s say you were making $30,000.00 annually. What changes? Overall, that $2,500.00 would represent a far greater burden to pay off. It would be the same tax free $2,500.00 though, so if you devoted one month’s salary of your entire year into this specific account, then you would definitely be able to say that you worked that entire month without paying any taxes at all. Furthermore, when you would make back that $625.00, you would also be making back more than an entire week’s worth of salary, absolutely free! Just because you are being financially savvy, you are actually getting rewarded! Not exactly a bad deal to get free money while you are actually digging yourself out of student loan debt as well, is it?
But, the thinking should be deeper than just that! If you paid the full $2,500.00 then you have actually paid off $2,500.00 from your student loans while you also receive an extra $625.00 simply by paying off your loans as well. In other words, just by delaying some gratification you were able to turn $2,500.00 into $3,125.00 just like that!
Does this sort of thing really end up making a difference? It might! In the long run you will be more likely to see higher and higher benefits overall, and it could continue to be a great asset to you as well. Just imagine if you were able to keep this $625.00 figure every year for a decade. You would have over $6,000.00 of real money in your pocket, as well as a significantly lower level of debt than you would otherwise have as well. It might not seem like the most important thing overall, but it definitely starts to add up. And, in an economy like the one that we currently live in, you can definitely start to see the importance of how you avoid paying some taxes and putting more of your own money back into your pocket for free! See what you get from Torrance Cash Advance Loans tips!
Obviously these sorts of scenarios are going to be specific to the individuals that want to use them. The variables will also change and therefore the specific benefits will change as well for anyone who wants to employ this type of strategy. However, one thing is for certain; the government will allow you to deduct what you pay on your interest expenses (up to a certain level) off of your taxable income and it’s definitely worth it to look into this situation to see if you can benefit as well.
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