Question

This year, Randy paid $29,650 of interest on his residence. (Randy borrowed $472,000 to buy his residence, and it is currently worth $522,000.) Randy also paid $3,050 of interest on his car loan and $5,025 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?

a. Randy received $2,200 of interest this year and no other investment income or expenses. His AGI is $75,000.
b. Randy had no investment income this year, and his AGI is $75,000.

Answer 1

a. $31,850

b. $29,650

Step-by-step explanation:

Requirement A:

Interest on his residence is deductible = $29,650

Interest on car loan (non deductible) = $0

Margin Interest to his stockbroker (limited to $2,200) = $2,200

Total deductible = $31,850

Requirement B :

As randy has no investment he can only deduct $29,650 his interest on the home loan.