Carol Jones, a single person, has an annual income of $32,200. The principal and interest payment on the $25,000 loan (30 years at 8%) for her condominium is $7.34 per $1000. Annual property taxes are $1,200 and insurance is $280 a year.

Ms. Jones would like to purchase a larger unit in a new high rise, but her monthly principal and interest will increase to $330.30, plus annual taxes will be $2,100. Interest on the $45,000 will be 8% as rates are lower than when she purchased her present condominium.

In 200-250 words, given Ms. Jones' situation as described here, answer and discuss the following:

What amount is deductible on the interest Ms. Jones currently pays if she is in the 28% tax bracket?
If Ms. Jones purchases the new condominium, how would this affect her income tax? Analyze the investment from the perspective of tax savings.
What should Ms. Jones consider before making this decision?
What calculations should Ms. Jones make?
What other savings would Ms. Jones realize?

Answer rating: 100% (QA)

To calculate the deductible amount on the interest Ms Jones currently pays we need to determine her annual interest expense The principal and interest ... View the full answer