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 10,826.65 or 7,733
Principle Amount of Loan : $483,333
First five year payment is Interest only
Annual Interest payment (483,333 * 7%) = 33,833
Marginal tax rate : 32%
After tax cost of Interest 33,833*0.68 = 23,006.44
Javier and Anita Sanchez purchased a home on January 1, 2018, for $725,000 by paying $241,667...
Javier and Anita Sanchez purchased a home on January 1, 2019, for $600,000 by paying $200,000 down and borrowing the remaining $400,000 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. a. What is the after-tax cost of the interest expense to the Sanchezes in 2019? After-tax cost...
Javier and Anita Sanchez purchased a home on January 1, 2019, for $600,000 by paying $200,000 down and borrowing the remaining $400,000 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. c. Assuming the interest expense is their only itemized deduction for the year and that Javier and...
Javier and Anita Sanchez purchased a home on January 1, 2018, for $695,000 by paying $231,667 down and borrowing the remaining $463,333 with a 6 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.) a. What is the after-tax cost of...
Javier and Anita Sanchez purchased a home on January 1, 2019, for $684,000 by paying $228,000 down and borrowing the remaining $456,000 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. 1. What is the after-tax cost of the interest expense to the Sanchezes in 2019? 2. Assume...
Javier and Anita Sanchez purchased a home on January 1, 2019, for $804,000 by paying $268,000 down and borrowing the remaining $536,000 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. a. What is the after-tax cost of the interest expense to the Sanchezes in 2019? B. Assume...
Required information [The following information applies to the questions displayed below.] 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...
Javier and Anita Sanchez purchased a home on January 1, 2014, for $525,000 by paying $210,000 down and borrowing the remaining $315,000 with a 9 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 30 percent. a. What is the after-tax cost of the interest expense to the Sanchezes in 2014? (Do not...
Required information The following information applies to the questions displayed below Javier and Anita Sanchez purchased a home on January 1, 2018, for $630,000 by paying $210,000 down and borrowing the remaining $420,000 with a 4 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...
Required information [The following information applies to the questions displayed below.] Javier and Anita Sanchez purchased a home on January 1, 2019, for $648,000 by paying $216,000 down and borrowing the remaining $432,000 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...
Javier and Anita Sanchez purchased a home on January 1 of year 1 for $1,000,000 by paying $200,000 down and borrowing the remaining $800,000 with a 6 percent loan secured by the home. The Sanchezes made interest only payments on the loan in years 1 and 2. (Leave no answer blank. Enter zero if applicable.) c. Assume year 1 is 2018 and by the beginning of year 4, the Sanchezes have paid down the principal amount of the loan to...