T purchased his home for $100,000 five years ago.Although he has made no improvements to the home, it has appreciated considerably and is currently worth $175,000.Assuming T obtains a $30,000 second mortgage on his home and uses the proceeds to purchase a personal auto, the interest on such debt is deductible as long as he itemizes his deductions.

Question

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The interest on a mortgage taken out on a taxpayer's primary residence is generally deductible if the loan amount does not exceed the fair market value of the home. In this scenario, T's mortgage amount of $30,000 does not exceed the current value of his home ($175,000), so the interest on the second mortgage is deductible as long as T itemizes his deductions on his tax return.

T Purchased His Home for $100,000 Five Years Ago