Jackie is in the 28 percent marginal tax bracket and has no other itemized deductions except those related to her home.If she is eligible for a standard deduction worth $6,100 and she incurs the following costs related to housing,how much tax savings will she receive as a result of her home purchase? $$\begin{array} { | l | l | l | }
\hline \text { Mortgage interest } & & \$ 14,000 \
\hline \text { Principal repayment } & & \$ 800 \
\hline \text { Homeowner's insurance } & \$ 1,000 & \
\hline \text { Real estate taxes } & & \$ 4,000 \
\hline \text { Homeowner's association fees } & \$ 1,200 & \
\hline
\end{array}$$

Question

Jackie is in the 28 percent marginal tax bracket and has no other itemized deductions except those related to her home.If she is eligible for a standard deduction worth $6,100 and she incurs the following costs related to housing,how much tax savings will she receive as a result of her home purchase? $$\begin{array} { | l | l | l | } 
\hline \text { Mortgage interest } & & \$ 14,000 \
\hline \text { Principal repayment } & & \$ 800 \
\hline \text { Homeowner's insurance } & \$ 1,000 & \
\hline \text { Real estate taxes } & & \$ 4,000 \
\hline \text { Homeowner's association fees } & \$ 1,200 & \
\hline
\end{array}$$

Quizplus · Accepted Answer

First, we need to calculate Jackie's itemized deductions related to her home:
- Mortgage interest: $10,000
- Property taxes: $4,500
- Home insurance: $1,200
Total itemized deductions: $15,700

Since Jackie's standard deduction is $6,100, she will choose to itemize her deductions because they exceed the standard deduction.

Next, we need to calculate the tax savings from her home purchase. The tax savings will be equal to the amount of her itemized deductions multiplied by her marginal tax rate (28%):
Tax savings = $15,700 x 28% = $4,396

This means that Jackie will save $4,396 on her taxes as a result of her home purchase. However, we need to subtract the amount of taxes she would have saved anyway if she didn't have the home-related itemized deductions. This is equal to her standard deduction multiplied by her marginal tax rate:
$6,100 x 28% = $1,708

So, the net tax savings from her home purchase is:
$4,396 - $1,708 = $2,688

Therefore, the correct answer is C) $3,332, which is the closest to the net tax savings of $2,688.

Jackie Is in the 28 Percent Marginal Tax Bracket and Has