Sally and Jim purchased their personal residence in Santa Barbara 20 years ago f

Question

Sally and Jim purchased their personal residence in Santa Barbara 20 years ago for $150,000.The home has a fair market value today of $1,000,000. For the current year, they have a $10,000 first mortgage on their home, on which they paid $1,000 interest. They also have a home equity loan secured by their home with a balance throughout the year of $110,000. The proceeds of the home equity loan were used to send their two children to college. They paid interest on the home equity loan of $11,000 for the year.

Calculate the amount of their deduction for interest paid on qualified residence debt and qualified home equity debt for 2004.

a)qualified residence acquisition debt interest

b)qualified home equity debt interest

Explanation / Answer

A) Qualified acquisition debt interest is the $1,000 paid on the $10,000 first mortgage.

B)Qualified home equity debt interest is $10,000 or the interest paid on the first $100,000 of home equity debt spent on non-acquisition or home improvement expenditures.

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

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