Stop Guessing. Calculate Your Real Spread.
Most financial advice ignores tax-drag. Savings accounts and stock dividends lose up to 40% of their growth to federal and state brackets. This calculator reveals the mathematically correct path.
Tax Bracket Analysis
Enter your ordinary income and state preset. We parse your AGI to apply federal ordinary, capital gains, and NIIT rates.
True Cost of Debt
Input your debt rate. If it's a student loan or mortgage, we'll factor in itemization caps and interest deductions.
Verdict Centerpiece
View your guaranteed payoff spread compared side-by-side with 5 major tax-sheltered and taxable asset classes.
OBBBA car loan deduction is only allowed on US-assembled vehicles.
Guaranteed Early payoff beats HYSA / CD by 1.79% Spread
Math strongly favors paying off your car_loan debt. Doing so guarantees an effective, tax-free return of 4.68%, beating the tax-adjusted investment yield of 2.89% by 1.79%.
*Estimates only. Not financial or tax advice. View full disclaimers below.*
| Asset Class | Nominal | Fed Drag | State Drag | After-Tax | Spread vs Debt |
|---|---|---|---|---|---|
| 🎯 Payoff CAR LOAN | 6.00% | - | - | 4.68% | (Guaranteed) |
| HYSA / CD | 4.00% | 22.0% | 5.9% | 2.89% | -1.79% |
| T-Bills (3-Mo) | 4.15% | 22.0% | 0.0% | 3.24% | -1.44% |
| Taxable Stocks | 8.00% | 0.9% | 0.0% | 6.92% | +2.24% |
| Roth / HSA | 8.00% | 0.0% | 0.0% | 8.00% | +3.32% |
| Traditional IRA | 8.00% | 34.2% | 9.1% | 4.53% | -0.15% |
Stocks assume an index fund compounding over 10 years with a 1.3% qualified dividend drag, capital gains deferred until sale. T-Bills are state tax exempt. Debt payoffs yield a guaranteed return.
Frequently Asked Questions.
Understand the underlying tax implications of capital allocation, debt management, and investing.
Should I pay off my car loan, student loan, or invest in stocks?
Paying off debt provides a guaranteed, tax-free return equal to the interest rate on the debt. Investing in stocks offers potentially higher returns but carries risk and is subject to annual tax drag (ordinary income tax on HYSA interest, or dividend and capital gains drag on index funds). This calculator accounts for W-2 income brackets and deductions to find the exact mathematical winner.
Is it better to pay off a car loan or invest in stocks?
Unlike student loans and mortgages, car loan interest is generally not tax-deductible (except under special provisions like the OBBBA). Thus, paying off a car loan is equivalent to earning a guaranteed, tax-free return equal to the interest rate. If your tax-adjusted investment returns are lower than the car loan rate, payoff wins.
Does HYSA interest get taxed and how does tax drag affect returns?
Yes, interest from High-Yield Savings Accounts (HYSAs) is taxed annually at your marginal ordinary income tax rate. For high earners, this tax drag can reduce your return by 30% to 40% or more (including federal tax, state tax, and the Net Investment Income Tax (NIIT)), making debt payoff much more attractive.
Is mortgage interest tax deductible in 2026?
Under the current 2026 tax rules, mortgage interest is deductible only if you itemize deductions rather than taking the standard deduction ($16,100 Single / $32,200 MFJ). High earners with AGI exceeding the 37% federal ordinary bracket threshold ($640,600 Single / $768,700 MFJ) will also face a 2/37ths reduction in their itemized deduction benefits.