Question

Mary purchased a home in year 1 for $200,000. She made a 20-percent down payment and financed the rest with a 15 year loan at six percent. In year 1, she took out a $20,000 home equity loan and used the proceeds to go on a trip around the world. In year 2, her interest payments were $9,600 on her mortgage and $1,400 on her home equity loan. What amount can she deduct in year 2 as an itemized deduction?

Answer 1

Answer:

If Mary decides to itemize her deductions, she can deduct $11,000 from her gross income (= $9,600 + $1,400).

Explanation:

For 2019, Mary can deduct mortgage interests from her first loan and the interests from her home equity loan as itemized deductions. Deductions are available for mortgage debt and other home equity loans up to $500,000 for single filers and $1,000,000 for married joint filers.