During 2014, Megan purchased a beachfront condominium for $600,000. She paid $15

Question

During 2014, Megan purchased a beachfront condominium for $600,000. She paid $150,000 down and took out a $450,000 mortgage, secured by the condominium. At the time of the purchase, the outstanding mortgage on Megan’s principal residence was $700,000, which was secured by her residence. The fair market value of Megan’s principal residence, which she purchased in 1998, is $1.4 million. What is Megan’s qualified mortgage indebtedness interest that she may deduct on her 2014 federal income tax return?

Explanation / Answer

$ 700000 is the qualified mortgage indebtness interest that can be claimed as deduction for 2014 in Federal Income tax return.

Part 1 of Federal tax laws states that :-

Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan.

You can deduct home mortgage interest if all the following conditions are met.

You file Form 1040 and itemize deductions on Schedule A (Form 1040).

The mortgage is a secured debt on a qualified home in which you have an ownership interest.

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