Question

On January 1, 2016, your sister's pet supplies business obtained a 30-year amortized mortgage loan for $275,000 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

Answer:

$52,259

Explanation:

debt = $750,000

monthly payment = $750,000 / 150.3075 (PV annuity factor, 360 periods, 0.583%) = $4,989.77

I prepared an amortization schedule using an excel spreadsheet. Total interest expense for the first 12 months = $52,259.