in the 2016 the tax payer borrowed 40000 through a home equity loan and used the
ID: 2328835 • Letter: I
Question
in the 2016 the tax payer borrowed 40000 through a home equity loan and used the money for personal expenditures. the tax payer residence was acquired in 1986 at a cost of 150000.In 2016 the residence was worth 215000.the balance of the original mortgage on the residence is 130000.interest on the original mortgage is 15600 Interest on the home equity loan is 2700. how much of this interest payments may be treated as deductible mortgage interest on the 2016 tax return?
a.0
b.2700
c.15600
d. 18300
Explanation / Answer
Only $15,600 that is the interest on the original mortgage will be treated as deductible mortgage interest on the 2016 tax return. Interest on the home equity loan, $2,700 will not be treated as deductible mortgage interest on the 2016 tax return becausethe money obtained by the home equity loan was used for personal expenditures.
Therefore, the correct answere is c. 15,600
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