Joseph and Sandra,married taxpayers,took out a mortgage on their home for $350,000 15 years ago.In May of this year,when the home had a fair market value of $450,000 and they owed $250,000 on the mortgage,they took out a home equity loan for $220,000.They used the funds to purchase a single engine airplane to be used for recreational travel purposes.What is the maximum amount of debt on which they can deduct home equity interest?

Question

Quizplus · Accepted Answer

Interest is deductible only on the portion of the $220,000 home equity loan that does not exceed the lesser of:
-The fair market value of the residence,reduced by the acquisition indebtedness ($450,000 FMV - $250,000 acquisition indebtedness = $200,000).
-$100,000 ($50,000 for married persons filing separate returns).
Of the $220,000 home equity loan,interest on $100,000 is deductible as home equity interest.

Joseph and Sandra,married Taxpayers,took Out a Mortgage on Their Home