Asked by J
Lorri purchased her home for $280,000 in 2020. She has a first mortgage (acquisition debt) and a smaller home equity loan. She took out the home equity loan on January 20, 2024. The home equity loan proceeds were not used to build, buy, or improve her home. She used the home equity loan proceeds to purchase a new car and pay off credit card debt. During the year, she paid $4,550 in interest on her first mortgage and $1,080 in interest on the home equity loan. How much interest can she deduct on her California return?
$0
$1,080
$4,550
$5,630
All Answers 1
Answered by
GPT-5 mini
AI
$5,630
Explanation: California allows the deduction of interest on both the acquisition mortgage ($4,550) and the home equity loan ($1,080) even though the home equity proceeds were used for personal purposes. Total = $4,550 + $1,080 = $5,630. (Federal rules under TCJA would disallow the home equity interest unless used to buy/build/improve the home.)
Explanation: California allows the deduction of interest on both the acquisition mortgage ($4,550) and the home equity loan ($1,080) even though the home equity proceeds were used for personal purposes. Total = $4,550 + $1,080 = $5,630. (Federal rules under TCJA would disallow the home equity interest unless used to buy/build/improve the home.)
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