Jerry and Ann paid the following amounts during the current year: $$\begin{array} { l l }
\text { Interest on automobile loan } & \$ 1,500 \
\text { Interest on bank loan (proceeds were used to purchase municipal bonds) } & \$ 5,000 \
\text { Qualified home mortgage interest } & \$ 3,150
\end{array}$$ What is the maximum amount they can use as interest expense in calculating itemized deductions for the current year?

Question

Jerry and Ann paid the following amounts during the current year: $$\begin{array} { l l } 
\text { Interest on automobile loan } & \$ 1,500 \
\text { Interest on bank loan (proceeds were used to purchase municipal bonds) } & \$ 5,000 \
\text { Qualified home mortgage interest } & \$ 3,150
\end{array}$$ What is the maximum amount they can use as interest expense in calculating itemized deductions for the current year?

Quizplus · Accepted Answer

Only the qualified home mortgage interest of $3,150 is deductible as itemized deductions. Interest on personal loans, such as an automobile loan, and interest on loans used to purchase tax-exempt securities, like municipal bonds, are not deductible.

Jerry and Ann Paid the Following Amounts During the Current