Question

Your brother's business obtained a 30-year amortized mortgage loan for $250,000 at a nominal annual rate of 7.0%, with 360 end-of-month payments. the firm can deduct the interest paid for tax purposes. what will the interest tax deduction be for year 1?

Answer 1

You would first need to calculate the payment on this loan and then construct an amortization table.

Your payment would be $1,663.26

and with you table set up properly, you would pay $17,419.55 in interest for the first year

Answer 2

Answer: $1663.26 and $17,419.56

Step-by-step explanation:

Monthly payment on mortgage

= Amount × (r/n) / (1-(1+r/n)^-n×t

Where:

Amount = $250,000

r = 7%

n = year in months = 12

t = no of years = 30

= $250000 × (0.07/12) /(1-(1+0.07/12)^ -12×30

= $1663.26.

Tax deduction for year 1 would sum up to $17,419.56