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Discount & Tax Rate Help Screens
You may wish to print these instructions and refer to them as you fill in the input worksheet. You may also want to print a copy of the unfilled out input worksheet, make copies of it and fill it in before you make your input entries on this website.
You can use this program to compare new loans to each other or to compare new loans to your existing loan. It works equally well for both types of analysis.
Discount Rates:
A discount rate is the rate at which you will be earning interest on money that is invested. It may be invested in a savings account earning a fairly low rate of interest. Or it may be invested in CD's or the stock market earning a higher rate of interest. If you are not putting any money aside, you may enter a zero (0) as one of your discount rates. A zero discount rate will treat each payment as being made from available cash. A zero entry will assume you have no money in a savings or other interest bearing account. You can enter up to three discount rates. These rates should be entered as whole numbers with or without a decimal part (e.g. a discount rate of 4½% should be entered as 4.5). These are after-tax rates of return. Tax on any interest earned on your investments is presumed to have been paid. The rates reflect what you earn on your investments after taxes have been paid.
Allowable Range of Input: Minimum: 0 Maximum: 30
Tax Rate:
You may enter your marginal tax rate. This is the rate at which your next dollar of income will be taxed. If you are in the 28% bracket, enter 28. If in the 33% bracket, enter 33. This program will generate "after tax" results for each of the discount rates entered above. However, loan interest expense in not always deductible for tax purposes. If your adjusted gross income is above a certain amount (currently - $124,500 ), some of your interest deduction will not be allowed. Also if your loan amount is above a certain amount (currently - $1,100,000), interest expense on the portion of the loan above this amount will not be currently deductible. Please consult with a tax professional for tax advice. Even if all of your interest is not deductible, these analyses will still have validity. The before tax analyses will be correct. The after tax analyses will overstate your tax benefits if all interest is not deductible. However, your actual results will fall somewhere between the before tax analysis and the after tax analysis. Depending on how much of your interest expense is allowable, the after tax analysis results will fall either closer to the after tax analysis or closer to the before tax analysis.
Allowable Range of Input: Minimum: 0 Maximum: 55
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