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Tableau Dashboard Activity $14-1$: Home Ownership: Rent Versus Own $($Algo$)$

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Home Ownership: Rent Versus Own

Your tax clients Jack and Diane, a married couple filing a joint return, fell in love with a new construction house for sale in their small Illinois hometown. The builder offers two options on the home: purchase with $20\%$ down or rent the home. Assume the following facts and projections when considering the analysis:

Jack and Diane both have steady jobs with a current AGI of $$120,000.$ They anticipate annual AGI growth of $3\%.$

The home has a purchase price of $$200,000$ and is located in an area with an expected annual property value growth rate of $5\%.$

If Jack and Diane purchase the home, they will put $20\%$ down and finance the remainder on a $30$ year mortgage at $5\mathrm{.}25\%.$

Annual property taxes on the home are $2\mathrm{.}6\%$ of the home's value.

If Jack and Diane rent the home, they will invest what would have been their $20\%$ down payment into municipal bonds paying an annual interest rate of $4\%.$

The home rents for $1\%$ of the assessed property value per month.

Jack and Diane will use the home as their principal residence for all $10$ years.

Regardless of their decision, Jack and Diane intend to contribute $10\%$ of their AGI each year to their favorite qualified charitable organizations.

Jack and Diane intend to move out of the area $($but in the same State$)$ in $10$ years to support their parents in retirement. Their parents live in an area with substantially similar home costs.

Jack and Diane live in a State which imposes a tax on Federal AGI at $4\mathrm{.}95\%.$ The model uses $2022$ income tax brackets and assumes the inflation adjustments to tax brackets and standard deduction continue as trended from $2020$ to $2023.$

The model assumes current TCJA provisions will be extended beyond their current expiration of $2025.$

Click on the thumbnail images in Connect to open an active Tableau dashboard, which allows you to mouse$-$over the graphs to reveal specific amounts for use in answering the following questions.

Note: the Detail pane provides a summation of values based on the selected Year and Option criteria. Use the Year sliders and Option checkboxes to update the visual during your analysis.

Home Ownership: Rent Versus Own $-$ Part $1($Algo$)$

Required:

What is the effective tax rate in Year $1$ if Jack and Diane rent; own?

What is the projected property tax on the home in Year $3?$

What is the State Tax Deduction for Year $7$ if Jack and Diane own?

How much Mortgage Interest is paid by Jack and Diane over the $10$ year period?