Miguel Tijera plans to rent one house and purchase another. He estimates that mortgage interest deductions on his federal income tax will be 25% of his mortgage payments. He wants to spend no more than $800 a month on rent and $2000 a month on rent and mortgage payments combined. This amount does not take into account his income tax savings.

Suppose Miguel pays $800 in rent a month and pays the maximum total monthly amount (rent and mortgage combined) before tax savings. How much are his monthly tax savings?

Question

Miguel Tijera plans to rent one house and purchase another. He estimates that mortgage interest deductions on his federal income tax will be 25% of his mortgage payments. He wants to spend no more than $800 a month on rent and $2000 a month on rent and mortgage payments combined. This amount does not take into account his income tax savings.

Suppose Miguel pays $800 in rent a month and pays the maximum total monthly amount (rent and mortgage combined) before tax savings. How much are his monthly tax savings?

anonymous · Answer

The possible answers are 200, 500, 125, and 300 dollars. Please help!