Sweet! I'd forgotten about being able to take money out to lower the Adjusted Gross Income. Does anyone know the maximum one can save pre-tax? Assuming the firm has something similar to a 401(k) and I set up a Roth IRA?
Good point, though I mixed up the IRA terms. At the same time, if I make Partner, I don't think I'll be too concerned about my retirement. What about the interest on my loans giving me a tax-deduction? Will I be making too much for that to happen?
Quote from: ormachea on May 12, 2005, 04:24:11 PMGood point, though I mixed up the IRA terms. At the same time, if I make Partner, I don't think I'll be too concerned about my retirement. What about the interest on my loans giving me a tax-deduction? Will I be making too much for that to happen?Yep. Sorry. (I believe the limit is also 65k...I may be wrong on that exact number, but I know that 100+ is DEFINITELY ineligible...)
Yes, you will be able to deduct mortgage interest on your primary residence, although I'm not sure about your planned Texas property.
Easiest way to lower your AGI is to buy property. Property taxes and mortgage interest are deductible--you can lower your AGI considerably that way. Of course, depending on your income, you might have to start worrying about the AMT, but that's probably a few years away.One thing you might want to consider is stretching out your federal loan payments over more than 10 years, especially if your interest rate is low when you consolidate. You could still make large payments early on (although that might not make financial sense, depending on your interest rate), but choosing a longer repayment period will allow you to have a lower required payment, in case you just hate biglaw and decide to get out early.
Not sure of the answer to the AMT question, although I know it's become a problem for some upper-middle income people who were never intended to fall within its parameters. There is talk that Congress should correct the problem, but it doesn't seem likely to happen soon.As for the federal loans... I know what you mean about repaying for awhile. My consolidation is for 25 years, which makes me sick when I think about it. But, my interest rate is less than 3 percent, and after I schedule direct deposit it drops a quarter point and then with three years of on-time payments it will drop another quarter. With an interest rate of just slightly more than 2 percent, paying ahead doesn't make financial sense. I can definitely find an investment with a greater return than that. Add in that I'm married and will be able to deduct my student loan interest, and it makes sense for me to drag it out as long as possible.