Question

On March 31, 2015, Mary borrowed $200,000 to buy her principal residence. Mary paid 3 points to reduce her interest rate from 6 percent to 5 percent. The loan is for a 30-year period. What is Mary's 2015 deduction for her points paid?

A. $50
B. $150
C. $4,500
D. $6,00

Answer 1

Mary can deduct the full amount of $6,000, which represents the 3 points she paid on her principal residence loan in the 2015 tax year.

Step-by-step explanation:

The question revolves around what Mary's deduction for points paid on her principal residence loan would be for the year 2015. Mary borrowed $200,000 and paid 3 points (each point is 1% of the loan amount) to reduce her interest rate. Therefore, she paid 3% of $200,000, which equals $6,000. Since points paid for the purchase of a principal residence can generally be fully deductible in the year they are paid, the deduction for 2015 would be the full amount of $6,000. Thus, the correct answer would be D. $6,000.