| campbell - 1/26/2024 22:59
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.
The note interest is tax deductible in as much as it is used for farm business purposes. Enjoy your audit if you deduct line of credit interest for items that are not deductible. |