The IRS allows you to invest an amount of money pre-tax, can you also pay off debt pre-tax?

Question

I was just wondering, alot of people just coming out of college have huge amount of debt and arent ready to start contributing to a IRA or a retirement plan but we have huge amounts of debt, is there a way we can divert money into a plan to help us pay off our debt faster that is tax free? similar to the way you can divert money into a tax free investment/retirement?

Answer 1

Favorite Answer

No.

Answer 2

Not directly. However, if you expect to acquire medical debt in the future (this does not help with existing debt), you may be able to make pre-tax contributions to an HSA or FSA before the medical expenses happen, and later use the contributed money, tax-free, to pay the medical bills.

Also, there are the following tax advantages to paying off your debt:

1. You avoid being taxed on "forgiven debt" (unpaid debt that must be included in taxable income).

2. You will be better able to qualify to obtain a mortgage, which allows you to deduct the interest on the mortgage and the real estate taxes on the property that you buy.

Answer 3

Don't I wish! Sorry, no, that's not possible under current laws.

Answer 4

No, there isn't anything like that available.