Question

This year Randy paid $29,800 of interest on his residence. (Randy borrowed $474,000 to buy his residence, and it is currently worth $524,000.) Randy also paid $3,100 of interest on his car loan and $5,100 of margin interest to his stockbroker (investment interest expense). How much of this interest expense can Randy deduct as an itemized deduction under the following circumstances

Answer 1

Randy can deduct $33,900 interest expense as an itemized deduction.

Step-by-step explanation:

a) Data and Calculations:

Mortgage interest on residence = $29,800

Mortgage loan = $74,000

Current price of house = $524,000

Car loan interest = $3,100

Investment (margin) interest = $4,100

Deductible interest expenses:

Mortgage interest on residence = $29,800

Investment (margin) interest = 4,100

Total deductible interest = $33,900

b) The car loan interest that Randy incurred is not tax-deductible unless the car is used for his business. Otherwise, only the portion used for business is deductible. It is assumed that the car loan interest was incurred for private use and not business use. Therefore, it is not deductible.