Question

Robin is single and purchases a new home for $80,000 in 2018. She pays $8,000 down and borrows the remaining $72,000 by securing a mortgage on the home. Robin pays $1,750 in closing costs, $1,600 in points to obtain the mortgage, and $4,440 in interest on the mortgage during the year. Her adjusted gross income is $78,000. What is Robin’s allowable itemized deduction for interest paid?

Answer 1

Answer: $6,040

Explanation:

To find out Robin’s allowable itemized deduction for interest paid we ADD the interest paid on the acquisition debt which is her Allowed Deductible Interest to the points that she obtained in the Initial Mortgage.

This figure is what she is allowed to deduct.

Calculating that would be,

= 4,440 + 1,600

= $6,040

Robin’s allowable itemized deduction for interest paid is $6,040.

Note that Closing costs are not Deductible but are instead added to the basis of the house.