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CENTRAL ILLINIOS | Don't forget to figure your income tax in the decision. Your operating note interest is tax deductible. Say if you have a thousand dollars to find a home for - putting it against your 8% operating note will save you $80 on interest in a year but that 80 would have been deductible so if you are in a 30% tax bracket(not hard to get there if you figure US, State, Social Security, and Medicare) your after tax savings is only $56($80 X 70%). But that return(5.6%) is guaranteed(unless rates fall). Putting your $1000 in the mutual fund would have to earn you $56 after taxes(US and State)(no SS or Med. on unearned income) to be equal. So roughly you would need a return of $68.20 from the mutual fund before income tax or 6.8.%. Somebody check my math - it's getting late. | |
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Save on operating interest or invest in mutual funds?
