Your brothers business obtain a 30 year amortized mortgage loan for $300,000 nominal annual rate of 7% with 360 end of month payments the firm can deduct the interest paid for tax purposes. What will the interest tax deduction be for year one?

246

Explanation:

The amount to be interest tax deductible is 246.

This is the payment done against the loan. To calculate,

F = C { [ (1 + i/n) ^t*n ] / i/n}

Where, F = Loan, C = Payment, i = Interest Rate, t = Years, n = payments (Monthly, Quarterly etc.)

C = $300,000 / { [ (1 + i/n) ^t*n ] / i/n}

= $300,000 / { [ (1 + 0.07/12) ^30*12 ] / (.07/12) }

= 246