What is the after-tax cost of the interest expense

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Javier and Anita Sanchez purchased a home on January 1, 2021, for $672,000 by paying $224,000 down and borrowing the remaining $448,000 with a 7 percent loan secured by the home. The loan requires interest-only payments for the first five years. The Sanchezes would itemize deductions even if they did not have any deductible interest. The Sanchezes' marginal tax rate is 32 percent.

Problem 1: Assuming the interest expense is their only itemized deduction for the year and that Javier and Anita file a joint return, have great eyesight, and are under 60 years of age, what is the after-tax cost of their 2021 interest expense?

Reference no: EM133000648

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