This year, Randy paid $30,250 of interest on his residence. (Randy borrowed $480,000 to buy his residence, and it is currently worth $530,000.) Randy also paid $3,250 of interest on his car loan and $5,325 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?

Question

Heaven Mcpherson

Business

12 October, 17:18

This year, Randy paid $30,250 of interest on his residence. (Randy borrowed $480,000 to buy his residence, and it is currently worth $530,000.) Randy also paid $3,250 of interest on his car loan and $5,325 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?

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Delilah Cuevas · Answer 1

a) Randy received $2,800 of interest this year and no other investment income or expenses. His AGI is $75,000.

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Explanation:

Randy can deduct $33,050 i. e. (30,250 + 2800)

The interest on the car loan is non-deductible personal interest. However, he can deduct all $30,250 of his interest on the home loan as an itemized deduction.

The interest margin of $5,325 is assumed to be investment interest and this itemized deduction is limited to net investment income.

The amount of $2,800 of interest income qualifies as investment income and since, Randy has no other investment expenses, the investment interest expense would be limited to his $2,800 in net investment income.