What is the Schedule A deduction for interest expense? Using the below informati

Question

What is the Schedule A deduction for interest expense? Using the below information

On August 1, Paul took advantage of low interest rates and refinanced his $75,000 home mortgage with her original lender. The new home loan is for 15 years. He paid $215 in closing costs and $1,600 in discount points (prepaid interest) to obtain the loan. The house is worth $155,000, and Paul's basis in the house is $90,000. As part of the refinancing arrangement, he also obtained a $10,000 home-equity loan. He used the proceeds from the home-equity loan to reduce the balance due on her credit cards. Paul received several Form 1098 statements from her bank for interest paid by him in the current year. Details appear below. (See also ¶9)

Primary home mortgage                 $7,100

Home-equity loan                     435

Credit cards                                498

Car loan                                      390

Explanation / Answer

As per Topic Number 505 - Interest Expense, Paul can deduct Primary home mortgage interest of $ 7100 and home equity loan interest of $ 435. It is assumed that prepay interest points are adjusted in the $ 7100 figure given by bank in Form 1098.

Credit card and car loans interest are specifically denied any deduction as per the topic.

For more read: https://www.irs.gov/taxtopics/tc505

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.