If your before-tax cost of a home equity loan is 12 percent and you are in the 30 percent marginal tax bracket,your after-tax cost of the home equity loan is 9 percent.

Question

Quizplus · Accepted Answer

The after-tax cost of a home equity loan is calculated by subtracting the tax shield (interest cost multiplied by the tax rate) from the before-tax cost. In this case, it would be 12 percent * (1 - 0.30) = 8.4 percent.

If Your Before-Tax Cost of a Home Equity Loan Is