Amanda purchased a home for $1,000,000 in year 1.She paid $200,000 cash and borrowed the remaining $800,000.This is Amanda's only residence.Assume that in year 10 when the home had appreciated to $1,500,000 and the remaining mortgage was $600,000,interest rates declined and Amanda refinanced her home.She borrowed $1,000,000 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 qualifying home-related debt for tax purposes?

Question

Quizplus · Accepted Answer

The total amount of qualifying home-related debt is the lesser of $1,000,000 or the sum of the remaining balance on the original mortgage ($600,000) plus any additional debt used to improve the home. In this case, Amanda did not use any of the additional $200,000 she borrowed in the refinancing to improve the home, so her total qualifying home-related debt is $600,000 + $100,000 (the amount of the original mortgage that was used to purchase the home) = $700,000.

Amanda Purchased a Home for $1,000,000 in Year 1