Robin purchased a home on July 1, 2009 for $300,000. She paid $200,000 down and financed the remaining $100,000. On January 1, 2014 when the outstanding balance of her mortgage was $85,000 and her home was valued at $300,000, she refinanced her home for $250,000. With the $250,000 loan, she paid off the remaining $85,000 balance of her original mortgage, she used $70,000 to substantially improve her home and she used the remaining $95,000 for purposes unrelated to her home. During 2014, Robin made interest only payments of $12,500 on the loan. What amount of the $12,500 interest expense is Robin allowed to deduct in 2014?

Question

Quizplus · Accepted Answer

The Answer of Robin purchased a home on July 1, 2009 for $300,000. She paid $200,000 down and financed the remaining $100,000. On January 1, 2014 when the outstanding balance of her mortgage was $85,000 and her home was valued at $300,000, she refinanced her home for $250,000. With the $250,000 loan, she paid off the remaining $85,000 balance of her original mortgage, she used $70,000 to substantially improve her home and she used the remaining $95,000 for purposes unrelated to her home. During 2014, Robin made interest only payments of $12,500 on the loan. What amount of the $12,500 interest expense is Robin allowed to deduct in 2014?

Robin Purchased a Home on July 1, 2009 for $300,000