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Javier and Anita Sanchez purchased a home on January 1, 2018, for $725,000 by paying $241,667 down and borrowing the remaining $483,333 with a 7 percent loan secured by the home. The loan requires interest-only payments for the first five years. The Sanchezes would itemize deductions even if they did not have any deductible interest. The Sanchezes’ marginal tax rate is 32 percent. (Round your intermediate calculations to the nearest whole dollar amount.)

c. Assuming the interest expense is their only itemized deduction for the year and that Javier and Anita file a joint return, have great eyesight, and are under 60 years of age, what is the after-tax cost of their 2018 interest expense?

The answer is not 23,006.65 or 33,833.31

Answer 1