Home Mortgage Interest.
Response to the following problem:
The Stephens own a home in Boston. They paid $780,000 for the home three years ago. Their current balance on their mortgage is $660,000. At the time that their home was worth $900,000, they refinanced their mortgage. Their new mortgage is for $800,000. In addition to the home in Boston, the Stephens also own a vacation home in Florida. They paid $350,000 for the home several years ago, and the current mortgage on the second home is $295,000.
a. Discuss how much interest the Stephens are allowed to deduct if the excess proceeds from the refinancing are used to buy or improve their main home
b. Same as in Part a. except that the excess proceeds from the loan are used to buy a new car.