Tax Planning 9- Mortgage interest deductions and limitations

Question 1

Interest on a mortgage secured by a “qualified
residence” is categorized as

Answer 1

mortgage interest

Question 2

A “qualified residence” is a

Answer 2

principal or second
residence

Question 3

Maximum:$750,000 principal for acquisition
indebtedness after what date?

Answer 3

12/15/2017

Question 4

Maximum principal for acquisition
indebtedness before 12/15/2017

Answer 4

$1,000,000

Question 5

True or Falso
Home equity indebtedness deduction eliminated

Answer 5

True

Question 6

If the second home is rented out at _______during the _______r, then the taxpayer must use the home for the greater of __days or ____ percent of the number of days that it is rented out at a fair rental value.

Answer 6

If the second home is rented out at any time during the tax year, then the taxpayer must use the home for the
greater of 14 days or 10 percent of the number of days that it is rented out at a fair
rental value.t

Question 7

Prepaid interest is ______ while points are ______.

Answer 7

Prepaid interest generally must be capitalized by a taxpayer using the cash method of
accounting and deducted over the life of a loan. Points are deductible.

Question 8

Premiums paid or accrued before January 1, 2021, for qualified mortgage insurance in
connection with acquisition indebtedness are deductible as home mortgage interest
(qualified residence interest).

Answer 8

Premiums paid or accrued before January 1, 2021, for qualified mortgage insurance in
connection with acquisition indebtedness are deductible as home mortgage interest
(qualified residence interest).

Question 9

True or false
A principal residence[1] can be a house, apartment, condominium, mobile home,
houseboat, or house trailer, and it does not matter whether it is rented or owned. Even
a separate piece of land that is contiguous to the taxpayer’s existing principal residence
can be considered a qualified residence. However, personal property that is not a fixture
under applicable local law (e.g., furniture) is not considered part of a taxpayer’s principal
residence

Answer 9

True

Question 10

Home equity indebtedness is any debt secured by a qualified residence that is not
acquisition debt. The amount of home equity debt that qualifies for the home mortgage
interest deduction before 2018 and after 2025 equals the lesser of:
* ___________________; or
* _________________________
Taxpayers who have two homes should calculate fair market value by determining the
value of each home on the day the last debt was secured by each home and then add
those amounts.

Answer 10

Home equity indebtedness[1] is any debt secured by a qualified residence that is not
acquisition debt. The amount of home equity debt that qualifies for the home mortgage
interest deduction before 2018 and after 2025 equals the lesser of:
* $100,000 ($50,000 if married filing separately); or
* the fair market value of the home, minus the home acquisition debt (including
grandfathered debt) as of the date that the last debt was secured by the home.
Taxpayers who have two homes should calculate fair market value by determining the
value of each home on the day the last debt was secured by each home and then add
those amounts.

Question 11

The determination of whether debt is incurred in acquiring, constructing, or
substantially improving a residence is made ______________ of the determination of
whether debt is secured by the residence, and without regard to whether the residence
is a qualified residence when the expenditures are made or the debt is incurred.

Answer 11

The determination of whether debt is incurred in acquiring, constructing, or
substantially improving a residence is made independently[7] of the determination of
whether debt is secured by the residence, and without regard to whether the residence
is a qualified residence when the expenditures are made or the debt is incurred.

Question 12

Debt incurred after construction or substantial improvement begins may
qualify to the extent of construction or improvement expenditures made not more than
_____ months before the debt is incurred.

A home under construction may be treated as a qualified residence for a
period of up to 24 months before its completion, provided it becomes a
qualified residence at the time it is ready for occupancy.

Answer 12

24 months

Question 13

A debt may be treated as incurred in acquiring a qualified residence to the extent
expenditures are made to acquire the residence within ______ days before or after the debt
is incurred.

Answer 13

90 days