This year, Randy paid $29,050 of interest on his residence. (Randy borrowed $576,000 to buy his residence, which is currently worth $640,000.)

This year, Randy paid $29,050 of interest on his residence. (Randy borrowed $576,000 to buy his residence, which is currently worth $640,000.) Randy also paid $2,850 of interest on his car loan and $4,725 of margin interest to his stockbroker (investment interest expense). How much of this interest expense can Randy deduct as an itemized deducti under the following circumstances?

a. Randy received $2,480 of interest this year and no other investment income or expenses. His AGl is $75,000.

Interest deductible

Solutions

Expert Solution

Interest deductable = 29,050 + 2,480 = 31,530

The interest on car loan is non-deductable personal interest.

The interest on home loan is an itemized deduction.

The 4,725 of margin interest is investment interest which is itemized deduction but limited to net investment income. The 2,480 of interest income qualifies for investment income and he doesn't have any other investment expenses do, the investment interest expense would be limited to 2,480 in net investment income.

ekkarill92 answered 1 year ago

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