Patrick purchased a home on January 1,2019,for $600,000 by making a down payment of $100,000 and financing the remaining $500,000 with a 30-year loan,secured by the residence,at 6 percent.During 2019,Patrick made interest-only payments on the loan of $30,000.On July 1,2019,when his home was worth $600,000,Patrick borrowed an additional $75,000 secured by the home at an interest rate of 8 percent.He used the $75,000 loan proceeds to purchase a new car.During 2019,he made interest-only payments on this loan in the amount of $3,000.What amount of the $33,000 interest expense that Patrick paid during 2019 may he deduct as an itemized deduction?

Question

Quizplus · Accepted Answer

Patrick can deduct the $30,000 interest paid on the original mortgage as it is secured by his residence and used to acquire the home. The $3,000 interest on the additional loan is not deductible because the loan proceeds were used to purchase a car, not for home acquisition or improvement.

Patrick Purchased a Home on January 1,2019,for $600,000 by Making