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10 July, 12:14

is year, Amy purchased a personal residence at a cost of $1,000,000. She borrowed $800,000 secured by the home to make the purchase. This year, she paid interest expense on this mortgage of $12,000. How much may she deduct?

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  1. 10 July, 13:39
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    Deductible Interest is $11,250

    Explanation:

    Compute at the amount of $750,000 the interest Amy could deduct as follows:

    Since the interest on loan secured by home could be deduct on the first $750,000 borrowing amount. Hence,

    Deductible Interest = Interest Paid * ($750,000 / Loan Secured by income)

    Deductible Interest = $12,000 * ($750,000 / $800,000)

    Deductible Interest = $11,250

    Hence, the Amy could deduct interest on borrowing $11,250
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