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3 May, 09:21

This year, major healy paid $ 40,000 of interest on a mortgage on his home (he borrowed $ 800,000 to buy the residence in 2015; $ 900,000 original purchase price and value at purchase), $ 6,000 of interest on a $ 120,000 home-equity loan on his home (loan proceeds were used to buy antique cars), and $ 10,000 of interest on a mortgage on his vacation home (borrowed $ 200,000 to purchase the home in 2010). Major healy's agi is $ 220,000. How much interest expense can major healy deduct as an itemized deduction

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  1. 3 May, 12:58
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    The nterest expense can major healy deduct as an itemized deduction is $55,000.

    Explanation:

    total interest expense = interest on mortgage home + interest on mortgage vacation home

    = $40,000 + $10,000

    = $50,000

    total amount of mortgage pf major healy = $800,000 + $200,000

    = $1,000,000

    the acquisition debt does not exceed $1,000,000 so he can deduct $40,000 mortgage interest on his home and $10,000 mortgage interest on his vacation home.

    interest on home equity loan = 6,000

    interest on home equity load = [home equity debt limit/home equity load]*interest on home equity load

    = [100000/120000]*6000

    = $5,000

    Therefore, The nterest expense can major healy deduct as an itemized deduction is $55,000.
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