Word problem - Buying houses and taxes?

[amanda_]

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.

 

[HallsofIvy]

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.

 

[amanda_]

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

 

[HallsofIvy]

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.

 

[amanda_]

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.