A homeowner incurs the following expenses: (1)$9,500 in interest on a mortgage loan on his residence; (2) $800 in real estate taxes plus a $450 late payment penalty; and (3)a $1,000 loan origination fee paid in the course of purchasing his home. How much may be deducted from his gross income?

A homeowner incurs the following expenses: (1)$9,500 in interest on a mortgage loan on his residence; (2) $800 in real estate taxes plus a $450 late payment penalty; and (3)a $1,000 loan origination fee paid in the course of purchasing his home. How much may be deducted from his gross income?

• A. $9,500
• B. $10,300
• C. $11,500
• D. $1,000

Answer: (B)

When you itemize deductions for a home, you can deduct mortgage interest and real estate taxes paid on your primary residence. Penalties for late payment are not deductible, and loan origination fees are typically not deducted as current expenses (they’re financing costs that may be amortized or treated differently if they’re true “points” paid to obtain the loan). Here, you can deduct the mortgage interest: 9,500, and the real estate taxes: 800. The late payment penalty of 450 isn’t deductible, and the 1,000 loan origination fee isn’t deducted in this year’s return. Total deductible amount = 9,500 + 800 = 10,300.

When you itemize deductions for a home, you can deduct mortgage interest and real estate taxes paid on your primary residence. Penalties for late payment are not deductible, and loan origination fees are typically not deducted as current expenses (they’re financing costs that may be amortized or treated differently if they’re true “points” paid to obtain the loan).

Here, you can deduct the mortgage interest: 9,500, and the real estate taxes: 800. The late payment penalty of 450 isn’t deductible, and the 1,000 loan origination fee isn’t deducted in this year’s return.

Total deductible amount = 9,500 + 800 = 10,300.