# After Tax Cost Of Debt Learn Just How Much Your Debts Really Cost You!

After tax cost of debt. To determine how much debt truly costs, you need to know which tax bracket you are in before you can apply for tax debt forgiveness.

It's a good idea to take a look at the tax cost of debt to see how that debt really costs you. You should do this taking into consideration the various tax benefits available for some types of debts.

For example, there is tax debt forgiveness for things like mortgage interest. Some of the tax deductions that are available help to reduce the overall cost of your debts.

While you can take a look at the pretax cost of debt, it's nice to know how much your debts are really going to cost you, the amount of interest you can deduct, and more.

Here is a look at how you can calculate the tax cost of debt:

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## How To Calculate The After Tax Cost Of Debt

Use Tax Tables

The first thing you need to do to come up with the total cost of debt is to use the tables that are available. This will help you know which bracket that you happen to be in. If you are a single person and the adjusted gross income for the past year was \$150,000, then for 2010, you'll be in the 28 percent bracket.

Look at Interest Deducted

It's a good idea to figure out how much interest that you have deducted on your income taxes. Take a closer look at the itemized deductions so you can see the interest amounts you have deducted from investment and mortgage debt. This is a type of tax debt forgiveness.

Doing the Math

Now that you have looked at the tax tables and you have looked at how much interest was deducted on your taxes, you are ready to do the taxable cost of your debts. Take the bracket you are in, then divide it by 100 so you get a decimal instead of a percentage.

For example, if you are in the 28th percentile, the decimal would end up begin 0.28. Then you need to take this amount and subtract it from the number "1." So, take 1 and subtract the number 0.28 from it, which gives you 0.72.

Next you take the answer you got when subtracting, which is 0.72, and then you take it and multiply It by the interest that you were able to deduct from taxes because of tax debt forgiveness. This will end up giving you the after tax cost of debt.

To go on with this example, if last year you ended up paying out \$10,000 in interest and you claimed it on your taxes, then you take the 0.72 from the last step and multiply it by 10,000. This gives you 7200, which means that the cost of the interest after taxes was actually \$7,200.

You'll definitely find that the pretax cost of debt and after tax cost of debt are a bit different. Taking the time to find out the cost after taxes will give you a better idea of what your debts are really costing you, which is very important when you are taking a close look at your finances.

### Where To Go For IRS Tax Debt Help?

The most important thing you can do to take control of your tax debts, and get your future back on track is to do something. Take action.

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