Interest on a second home

Course: Income Tax Planning
Lesson 8: Arriving at Taxable Income

Student Question:

Is my understanding correct that a taxpayer can deduct interest on a 2nd home under Home Acquisition Debt up to $750K, and also deduct interest on the primary residence under Home Equity Debt up to $750K? So, each home is considered separately and each is deductible up to $750k (mortgage debt)?

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Instructor Response:

The maximum total mortgage debt, including original home acquisition debt + any home equity debt, cannot exceed $750k.  Within that $750k total, home equity debt cannot exceed $100k.  For example, a taxpayer with a 750k first mortgage and a $100k home equity loan could only deduct interest on $750k, not $850k.