Amanda purchased a home for $1,000,000 in year 1. She paid $200,000 cash andborrowed the remaining $800,000. This is Amanda's only residence. Assume that in year10 when the home had appreciated to $1,500,000 and the remaining mortgage was$600,000, interest rates declined and Amanda refinanced her home. She borrowed$1,000,000 at the time of the refinancing, paid off the first mortgage, and used theremainder for purposes unrelated to the home. What is her total amount of qualifying home-related debt for tax purposes?

Question

Quizplus · Accepted Answer

For tax purposes, the qualifying home-related debt is limited to the amount used to acquire, construct, or substantially improve the home, which is the original $800,000 mortgage. After refinancing, only the remaining balance of the original mortgage ($600,000) qualifies, as the additional borrowed amount was used for unrelated purposes.

Amanda Purchased a Home for $1,000,000 in Year 1