Jacoby purchased a homein 2017 for $1,500,000 by making a $150,000 down payment and by borrowing the remaining $1,350,000 with a loan secured by the home. He made interest-only payments for 2017, 2018, 2019 and 2020. In 2020, Jacoby can deduct interest expense on $1,100,000 of the loan principal.

Question

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As of the tax laws in effect for the years mentioned, the IRS limits the mortgage interest deduction to interest paid on the first $750,000 of loan principal for loans taken out after December 15, 2017. Since Jacoby's loan exceeds this amount, he can only deduct interest on up to $750,000 of his loan principal, not $1,100,000.

Jacoby Purchased a Homein 2017 for $1,500,000 by Making a $150,000