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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Business

Vincent Schaefer

1 September, 21:15

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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Xiomara Daugherty · 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.