Solve.
-You are in the 25% tax bracket. The apartment rents for $1500 per month. Your monthly mortgage payments would be $1700, of which an average of $1400 per month goes toward interest during the
First year. Determine whether renting or buying is cheaper (in terms of monthly payments)during
The first year. Assume your are itemizing deductions in all cases.

Question

Quizplus · Accepted Answer

Since $1400 of the mortgage payment is interest and can be deducted, the effective cost is reduced by the tax savings. The tax savings per month is $1400 * 25% = $350. Therefore, the effective monthly cost of buying is $1700 - $350 = $1350, making buying cheaper than renting at $1500.

Solve. -You Are in the 25% Tax Bracket. the Apartment Rents