Hank, whose adjusted gross income is $100,000, purchases a new principal residence in the current year for $250,000. He borrows $220,000 from a local mortgage company and pays loan origination fees of $1,600. During the year, Hank pays $7,000 of interest on the loan. What is Hank's allowable interest deduction for the year?

Question

Quizplus · Accepted Answer

Hank's allowable interest deduction for the year includes the $7,000 of interest he paid on the loan. The loan origination fees are not deductible as interest in the year they are paid but are typically amortized over the life of the loan. Therefore, only the actual interest paid on the mortgage is deductible, making $7,000 the correct answer.

Hank, Whose Adjusted Gross Income Is $100,000, Purchases a New