This year, Carol, a single taxpayer, purchased a vacation home for $400,000 using a home equity loan of $350,000 on her principal residence.She has no other debt on her principal residence.Carol paid $16,000 of interest on the debt this year.How much of this interest is deductible assuming that Carol itemizes her deductions?

Question

Quizplus · Accepted Answer

Under the Tax Cuts and Jobs Act, interest on home equity loans is only deductible if the loan is used to buy, build, or substantially improve the taxpayer's home that secures the loan. Since Carol used the loan to purchase a vacation home, the interest is not deductible.

This Year, Carol, a Single Taxpayer, Purchased a Vacation Home