Question

Renee paid $4,000 in mortgage interest on a $110,000 mortgage that was taken out when she bought her home several years ago. She also has a home equity loan of $130,000 that she used to pay for a cruise around the world. The interest on the home equity loan was $8,000. What amount is deductible as interest expense for Renee in 2021

Answer 1

The amount that is deductible as interest expense for Renee in 2021 is:

= $4,000.

Step-by-step explanation:

a) Data:

Home mortgage - $110,000

Interest on home mortgage = $4,000

Home equity loan for a cruise around the world = $130,000

Interest on the home equity loan = $8,000

Deductible interest expense for Renee in 2021 is $4,000

b) Usually, the interest expenses that a taxpayer pays on her home equity loan to enjoy a cruise around the world, on personal credit card, on automobile loan, and on other types of personal consumer finance interests are not tax-deductible.