If the current tax law was changed,and the individual had to pay tax on the appreciation in housing values,and the interest costs and property taxes were not deductible,what would the annual cost of housing be for a person with a house valued at $150,000,a mortgage rate of 11 percent,property taxes of 3 percent,miscellaneous expenses and depreciation of 1 percent,and housing inflation of 7 percent? The person is in the 30 percent tax bracket.

Question

Quizplus · Accepted Answer

First, calculate the annual interest cost for the mortgage:

$150,000 x 0.11 = $16,500

Next, calculate the annual property tax:

$150,000 x 0.03 = $4,500

Then, calculate the annual miscellaneous expenses:

$150,000 x 0.01 = $1,500

Calculate the total annual cost without factoring in housing inflation:

$16,500 + $4,500 + $1,500 = $22,500

Since the person is in the 30% tax bracket, they will only be able to deduct 70% of their $4,500 property tax, or $3,150.

Add this deduction back to the total annual cost:

$22,500 - $3,150 = $19,350

Finally, factor in the 7% inflation rate:

$19,350 x 1.07 = $20,764.50

Therefore, the annual cost of housing for this person would be:

$20,764.50 rounded to the nearest hundred is $15,150.

If the Current Tax Law Was Changed,and the Individual Had