Margaret Lindley paid $15,000 of interest on her $300,000 acquisition debt for her home (fair market value of $500,000), $4,000 of interest on her $30,000 home-equity loan, $1,000 of credit card interest, and $3,000 of margin interest for the purchase of stock. Assume that Margaret Lindley has $10,000 of interest income this year and no investment expenses. How much of the interest expense may she deduct this year?

Question

Quizplus · Accepted Answer

Margaret may deduct the interest she paid on the home acquisition debt of up to $750,000 and the interest on the home-equity debt of up to $100,000 for a total of $19,000 ($15,000 + $4,000). The credit card interest and margin interest are not deductible. Therefore, her total interest deduction is $19,000.

Margaret Lindley Paid $15,000 of Interest on Her $300,000 Acquisition