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Assume your home is assessed at $225,000
Assume your home is assessed at $225,000. You have a $166,000 loan for 20 years at 5 percent. Your property tax rate is 1.0 percent of the assessed value. In year one, you would pay $8,300 in mortgage interest and $2,250 in property tax (1.0 percent on $225,000 assessed value).
Assuming you are in a 28 percent tax bracket, by what amount would you have lowered your federal income tax? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Expert Solution
Computation of Amount you would have lowered your federal income tax:
Tax Reduction = (Mortgage interest + Property tax) * Tax rate
= ($8,300+$2,250) * 28%
= $10,550*28%
= $2,954
So, Amount you would have lowered your federal income tax is $2,954.
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