Question
The Wilmoths plan to purchase a house and would like to determine the after-tax cost of financing its purchase. Given their projected taxable income, the
The Wilmoths plan to purchase a house and would like to determine the after-tax cost of financing its purchase. Given their projected taxable income, the Wilmoths are in the 24% Federal income tax bracket and the 8% state income tax bracket (i.e., an aggregate marginal tax bracket of 32%). Assume that the Wilmoths will benefit from itemizing their deductions for both Federal and state tax purposes. The total cash outlay during the first year of ownership will be $29,400 ($2,940 principal payments, $26,460 qualified residence interest payments).
If required, round your interim calculation to nearest dollar.
As a result, the annual after-tax cost of financing the purchase of the home will be $................
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