Hi, thanks, yes, this is starting to get to the core of my question. It’s exactly as you are discussing it:
1) is the tax on interest effectively the tax rate on your income AFTER the FEI is deducted, (which would often be zero or a much lower rate), or
2) is the tax on the interest the rate you would have paid if the FEI was not deducted?
I think you are saying in your most recent post that the tax rate is what you would have paid, as if you had not been able to deduct the FEI. I.e., if my tax rate would have been 25% on my wages, then the tax rate on the interest would be on top of that (probably 25% but could also increase into a higher tax bracket).
Am I understanding you correctly?
Thanks for your time to help with this issue…