Larry and Ally are married and file a joint return. They are considering purchasing a personal residence that will generate two deductions: $10,000 in home mortgage interest and $8,000 in real estate taxes. Their marginal tax rate is 24%. If Larry and Ally purchase the residence, what will be the after-tax cost of the additional $18,000 in expenditures?
What will be an ideal response?
Tax savings of expenditures: ($10,000 + $8,000) × .24 = $4,320
After-tax cost:: $18,000 - $4,320 = $13,680.
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