During 2019, Cary and Bill incurred acquisition debt on their residence of $1,300,000. They also borrowed $200,000 on a home equity line to pay college tuitions for their children. On a joint tax return, what is the amount of their qualified acquisition debt?
A)$1,000,000
B)$1,300,000
C)$750,000
D)$1,500,000
E)None of these

Question

Quizplus · Accepted Answer

Only the mortgage used to acquire, build, or substantially improve the home is considered qualified acquisition debt. Therefore, the $1,300,000 acquisition debt is qualified, but the $200,000 home equity line is not. Therefore, the amount of their qualified acquisition debt is $1,300,000 - $200,000 = $1,100,000. However, the maximum amount of qualified acquisition debt for which interest can be deducted is $750,000 due to the Tax Cuts and Jobs Act of 2017. Therefore, the answer is (C) $750,000.

During 2019, Cary and Bill Incurred Acquisition Debt on Their