The IRS allows you to invest an amount of money pre-tax, can you also pay off debt pre-tax?
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?
- Anonymous1 decade agoFavorite Answer
- StephenWeinsteinLv 71 decade ago
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.
- Bostonian In MOLv 71 decade ago
Don't I wish! Sorry, no, that's not possible under current laws.
- JudyLv 71 decade ago
No, there isn't anything like that available.