Question

On january 1, 2016, your sister's pet supplies 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 2016?

Answer 1

Assuming the interest does not compound monthly, the tax deduction can be calculated by first determining the amount of interest paid. Multiply 250,000 by .07. This results in an interest payment of $17,500. This amount is equivalent to the amount that can be used for tax deduction purposes.