Word problem - Buying houses and taxes?

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Homework Help Overview

The problem involves Miguel Tijera's financial planning regarding renting and purchasing a house, specifically focusing on how mortgage interest deductions affect his monthly payments. The context includes constraints on his budget for rent and mortgage payments, as well as the implications of tax savings on these expenses.

Discussion Character

  • Conceptual clarification, Assumption checking, Problem interpretation

Approaches and Questions Raised

  • Participants discuss the calculation of tax deductions based on mortgage payments and how it affects the total monthly payment Miguel would need to consider. There are attempts to clarify the correct interpretation of the problem's requirements regarding maximum payments after tax savings.

Discussion Status

There is an ongoing exploration of the problem, with participants questioning the assumptions made in the calculations and the interpretation of the question. Some guidance has been offered regarding the correct approach to calculating the maximum monthly amount after tax deductions, but confusion remains about the problem's phrasing and requirements.

Contextual Notes

Participants note the constraints of Miguel's budget, specifically the maximum amounts he is willing to spend on rent and combined mortgage payments, and the impact of tax deductions on these figures. There is also mention of the difficulty in aligning calculations with the options provided in the problem.

amanda_
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Homework Statement



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.

What is the maximum monthly amount (rent and mortgage combined) that Miguel would have to pay after subtracting his tax savings?

The Attempt at a Solution

= 2000(25%)
=1500

that's not one of the options, so I have no idea how to solve this.
 
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amanda_ said:

Homework Statement



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.

What is the maximum monthly amount (rent and mortgage combined) that Miguel would have to pay after subtracting his tax savings?




The Attempt at a Solution




= 2000(25%)
=1500

that's not one of the options, so I have no idea how to solve this.
The total rent and mortgage payments are $2000 but the rent could be up to $800 leaving no more than 2000- 800= $1200 for mortgage payments. The deduction is 25% of 1200, not of the whole 2000.
 
HallsofIvy said:
The total rent and mortgage payments are $2000 but the rent could be up to $800 leaving no more than 2000- 800= $1200 for mortgage payments. The deduction is 25% of 1200, not of the whole 2000.

Okay so, I get 300 - but that's not the correct answer either. So here's what I did

25%(1200) = 300
2000-300 = 1700
 
You seem to be just putting numbers together at random without thinking about what the problem asks. Yes, if he paid the maximum, 800 for rent, so that he was paying the minimum, $1200, for mortgage payments, he could deduct 25%(1200)= $300. But the problem did not ask for that, it asked for "the maximum monthly amount (rent and mortgage combined) that Miguel would have to pay after subtracting his tax savings".

That would be 2000- 300= $1700.
 
HallsofIvy said:
You seem to be just putting numbers together at random without thinking about what the problem asks. Yes, if he paid the maximum, 800 for rent, so that he was paying the minimum, $1200, for mortgage payments, he could deduct 25%(1200)= $300. But the problem did not ask for that, it asked for "the maximum monthly amount (rent and mortgage combined) that Miguel would have to pay after subtracting his tax savings".

That would be 2000- 300= $1700.

I don't understand what the question was asking - hence asking here.

You just gave the same equation I did, so I obviously wasn't putting numbers together.

Thanks.
 

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