UESTION 26 Hazel Nutt plans on living in NYC. Hazel is considering whether she should...
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UESTION 26 Hazel Nutt plans on living in NYC. Hazel is considering whether she should buy or rent. If Ms. Nutt buys the Co-Op apartment it will cost $550,000. This price includes all closing costs. Annual home ownership information: Property taxes: 1.5% of the property price Insurance: 1% of the property price Maintenance: 1.5% of the property price Mortgage loan: Assume Hazel will get a $450,000, 4%, 30-year interest only (IO) loan. There are no closing costs or points for the mortgage. Hazels marginal income tax rate is 30%. Her effective tax rate is 25%. She files her income tax returns as a single filer If she rents the same place, it will cost $3,000 per month in rent. If Hazel buys, what is her tax savings (i.e. the tax shield) from ownership in the first year?
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