Your annual mortgage payments are $10,000 of which $8,000 represents interest payments,your marginal tax rate is about 30%,and you itemize deductions.Your mortgage payments after taxes are how much?

Question

Quizplus · Accepted Answer

Since the interest payments of $8,000 can be itemized as a deduction, the amount of taxable income is reduced by $8,000. Therefore, the tax savings would be:

Tax savings = interest payments x marginal tax rate = $8,000 x 0.3 = $2,400

Thus, the mortgage payments after taxes would be:

$10,000 - $2,400 = $7,600 (Answer: A)

Your Annual Mortgage Payments Are $10,000 of Which $8,000 Represents