You are considering a home equity loan.Your marginal tax bracket is 25%.You want to borrow $30,000 and are quoted an APR of 10%.How much money would you save in taxes in the first year if you use the tax-deductible home equity loan?

Question

Quizplus · Accepted Answer

The interest paid on a $30,000 loan at an APR of 10% would be $3,000 for the first year. Since the interest is tax-deductible and the marginal tax bracket is 25%, the tax savings would be 25% of $3,000, which equals $750.

You Are Considering a Home Equity Loan