Question

Taxation question #2

Based on Exhibit 6-9 (Schedule A; Itemized deductions), Also attached: .2017 Schedule A (same as Exhibit 6-9) .2018 Schedule A (draft) 2018 Schedule A instructions Compare the 2017 and 2018 Schedule A's. Note a subtle but important difference between the two forms as it relates to the taxes you paid deduction 1. 2. Refer to the instructions for line 8 (Home Mortgage Interest Deduction). Assume taxpayer borrowed $1.5 million to purchase a home on January 1, 2017 at 4% interest. Assume the taxpayer pays only interest and does not repay any of the principal. 2a What is the annual interest cost (a mathematical question, not a tax question) 2b. Copy and paste instructions on "Limit on loans taken out on or before December 15, 2017." 2c. Assume the taxpayer is married filing jointly, what is the interest deduction?

Answer 1

Answer:- After comparing 2017 and 2018 Schedule A’s. Some Important Differences between the two form as it relates to the taxes you paid has came and they are mentioned as follows:-

• Overall limitation on itemized deduction no longer applies.
• Limitation on deduction for state and local taxes.
• No deduction for foreign taxes paid for real estate.
• Limitation on deduction for home mortgage interest.
• No deduction for home equity loan interest.
• No miscellaneous itemized deductions allowed.
• Limitation on the deduction for casualty and theft losses.
• Higher limitation threshold for certain charitable contributions.
• Expired deduction for mortgage insurance premium.

Answer 2 (a):- A home mortgage is any loan that is secured by your main home or second home, regardless of how equity loans, and refinanced mortgages.

A home can be any house, condominium, cooperative, mobile home, boat, or similar property. It must provide basic living accommodation including sleeping space, toilet and cooking facilities.

-The annual interest cost = 4% of $1.5 million = $60,000

2 (b). Following are the instructions on “Limit on loans taken out on or before December 15, 2017.

For Qualifying debt taken out on or before December 15, 2017, You can only deduct home mortgage interest on up to $1,000,000 ($500,000 if you are married filing separately) of that debt. The only exception is for loans taken out on or before October 13, 1987.

2 (c). If you’re married and file a jointly, Your qualified home(s) can be owned either jointly or by only one spouse.