Jessica purchased a home on January 1, 2013 for $500,000 by making a down payment of $200,000 and financing the remaining $300,000 with a 30-year loan, secured by the residence, at 6 percent. During 2013 and 2014, Jessica made interest-only payments on the loan of $18,000 (each year). On July 1, 2013, when her home was worth $500,000 Jessica borrowed an additional $125,000 secured by the home at an interest rate of 8 percent. During 2013, she made interest-only payments on this loan in the amount of $5,000. During 2014, she made interest only payments in the amount of $10,000. What is the maximum amount of the $28,000 interest expense Jessica paid during 2014 that she may deduct as an itemized deduction if she used the proceeds of the second loan to finish the basement in her home, landscape the yard, and add a home theater room in the basement of the home?

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The Answer of Jessica purchased a home on January 1, 2013 for $500,000 by making a down payment of $200,000 and financing the remaining $300,000 with a 30-year loan, secured by the residence, at 6 percent. During 2013 and 2014, Jessica made interest-only payments on the loan of $18,000 (each year). On July 1, 2013, when her home was worth $500,000 Jessica borrowed an additional $125,000 secured by the home at an interest rate of 8 percent. During 2013, she made interest-only payments on this loan in the amount of $5,000. During 2014, she made interest only payments in the amount of $10,000. What is the maximum amount of the $28,000 interest expense Jessica paid during 2014 that she may deduct as an itemized deduction if she used the proceeds of the second loan to finish the basement in her home, landscape the yard, and add a home theater room in the basement of the home?

Jessica Purchased a Home on January 1, 2013 for $500,000