8. Sharon sold her home on February 14th and purchased a new home one month later. The home cost $900,000 and was funded by obtaining an interest only mortgage from Chase for $900,000. She paid $9,000 of points to Chase to obtain this mortgage. On July 1st she refinanced the loan with Bank of America to obtain a lower interest rate on a 30 year fully amortizable loan. She paid another $9,000 of points to obtain this mortgage. On November 1st she obtained an equity line of credit on the home from Wells Fargo Bank for $75,000. She immediately advanced the entire amount to pay off her credit cards.
She had the following interest expense for the year: $6,100 for old home loan, $26,250 to Chase, $31,500 to Bank of America, $1,125 to Wells Fargo Bank, $12,400 on personal credit cards, $3,000 to stock broker for interest on funds used to purchase municipal bonds and $6,600 on a copier used in her business (Schedule C). What is the total amount of interest and points that will be included in her itemized deductions on Schedule A?
The amounts allowable as itemized deductions are:
$9,000 points on the Chase loan
$150 amortization of points on the BofA loan calculated at 9000 / 30 yr / 2 for half year
$6,100 old home loan
$1,125 Wells Fargo. See note 1
-0- Personal credit cards. ...
The solution explains which interest paid amounts are deductible together with notes of explanation for better understanding.