Taxes Taxes Taxes

[payitoff]

how do you deal with this when still in debt?

facts: married filing jointly-$112K combined-current withholding: married-5

a. put lesser withholding to put buffer by end of the year
b. max out all pre tax investments and use extra to pay down debt
c. pay debt aggressively and just deal with the tax bracket, tax owed until debt free.


--- this income will increase as of 2014 to about 150k+
were currently using 43% of take home pay in paying debts (about $97k), and plans to move to pre tax investments after, but were getting hit with huge taxes because of this

[dragoncar]

probably depends on the type of debt and interest rate.  Maybe follow the guidelines for a case study in this case, since we'll need more info.

[Zaga]

We are married, no kids, over $50K is SL debt, similar level of income as you.  Our decision was to split it up a bit.  All of our debt is 5%, so it's borderline as to if investments will be better or paying down the debt.  Also, we are rather firmly in the 25% tax bracket.  So we split it up, invest pre-tax as much as we can, while still paying significantly extra on the debt.

I can definitely see going all for the debt for a year or 2 though, as long as you don't do that for very long.

[payitoff]

We are married, no kids, over $50K is SL debt, similar level of income as you.  Our decision was to split it up a bit.  All of our debt is 5%, so it's borderline as to if investments will be better or paying down the debt.  Also, we are rather firmly in the 25% tax bracket.  So we split it up, invest pre-tax as much as we can, while still paying significantly extra on the debt.

I can definitely see going all for the debt for a year or 2 though, as long as you don't do that for very long.

that's the plan, so we'll probably do the same thing as you guys then... at least it will help relieve some tax burden

[FastStache]

how do you deal with this when still in debt?

facts: married filing jointly-$112K combined-current withholding: married-5

a. put lesser withholding to put buffer by end of the year
b. max out all pre tax investments and use extra to pay down debt
c. pay debt aggressively and just deal with the tax bracket, tax owed until debt free.


--- this income will increase as of 2014 to about 150k+
were currently using 43% of take home pay in paying debts (about $97k), and plans to move to pre tax investments after, but were getting hit with huge taxes because of this

I made about 110, married with one kid. I paid about 12K in taxes. I plan to reduce my bill further with more pre-tax contributions.

My advice is max your pre-tax contributions. Make sure you are getting all the deductions you can since you are in the 25% bracket, maybe the 28% bracket. Then pay your debt down a little less aggressively, but you will have more money in the long run. Student loan is not forgiven, but if any fluctuations in income occur, they can adjust your payments.

http://taxfoundation.org/blog/2014-tax-brackets