Question

John and Sandi Samson, who file a joint income tax return, pay 28 percent income tax on their earnings. If they have an $85,000 mortgage at 8 percent interest, their allowable tax savings from mortgage interest would be __________

Answer 1

Their allowable tax deduction on the mortgage interest is $1904

Step-by-step explanation:

In arriving at the tax savings,the interest on mortgage needs to be ascertained.

Interest on mortgage=8%*$85000

Interest on mortgage=$6800

However,the tax savings on the interest is by applying the tax rate of 28% to the interest on mortgage

Tax savings=28%*$6800

Tax savings=$1904