A taxpayer is in a 33-percent tax bracket and itemizes deductions.He obtains a mortgage from a bank at 9-percent interest.The actual rate of interest he pays is:

Question

Quizplus · Accepted Answer

Since the taxpayer is in a 33-percent tax bracket, he can deduct 33 percent of his mortgage interest payments from his taxable income. Therefore, the actual rate of interest he pays is reduced by this amount.

9 percent - (0.33 x 9 percent) = 6 percent

So, the actual rate of interest he pays is 6 percent.

A Taxpayer Is in a 33-Percent Tax Bracket and Itemizes