During the current year,Carl and Jill incurred acquisition debt on their residence of $1,250,000.They also took out a home equity loan for $175,000.On a joint tax return,what is the amount of their qualified acquisition debt and qualified home equity debt,respectively?

Question

Quizplus · Accepted Answer

For acquisition debt to qualify for the mortgage interest deduction, the debt must be used to buy, build, or substantially improve the taxpayer's main or secondary home and be secured by the home. Since their acquisition debt is $1,250,000 and they only have one residence, the qualified acquisition debt is limited to $1,000,000 ($500,000 for married taxpayers filing separately). The home equity loan of $175,000 is considered home equity debt and can be deducted as mortgage interest as long as the total of the acquisition debt and home equity debt doesn't exceed the value of the home and the total debt limit of $750,000 (or $375,000 for married taxpayers filing separately). Therefore, the qualified home equity debt is $100,000 ($750,000 - $1,000,000 + $175,000 = $75,000; limit is $100,000). Hence, the answer is (C).

During the Current Year,Carl and Jill Incurred Acquisition Debt on Their