Question

Raafiq's monthly mortgage payment was $1500 last year, and on average, 12% of each payment was interest. If Raafiq itemizes deductions on his federal income tax return, how much can he deduct for mortgage interest?
A. $180 B. $1680 C. $2160 D. $125

Answer 1

Here the monthly payment is $1500.

Now 12% of this payment is interest.

Now 12% of 1500 = 0.12 ×1500 = $180

But this is the interest for one month.

As deductions are made in the financial year.

So the interest needs to be calculated for the whole year which is 12 months.

Now the interest for the whole year is 180 × 12 = $2160.

Option C) is the right answer.