Amanda purchased a home for $820,000 in 2016. She paid $164,000 cash and borrowed the remaining $656,000. This is Amanda's only residence. Assume that in year 2022, when the home had appreciated to $1,230,000 and the remaining mortgage was $492,000, interest rates declined and Amanda refinanced her home. She borrowed $820,000 at the time of the refinancing, paid off the first mortgage, and used the remainder for purposes unrelated to the home. What is her total amount of acquisition indebtedness forthe purposes of determining the deduction for home mortgage interest? (Assume not married filing separately.)

Question

Quizplus · Accepted Answer

The acquisition indebtedness is limited to the original amount borrowed to acquire the home, which was $656,000. However, the remaining mortgage balance at the time of refinancing was $492,000, which is the amount considered for the deduction. The additional amount borrowed is not considered acquisition indebtedness as it was used for purposes unrelated to the home.

Amanda Purchased a Home for $820,000 in 2016