Explain what acquisition indebtedness and home equity indebtedness are with respect to a qualified residence of a taxpayer. Identify any limitations on the deductibility of interest expense on this indebtedness.

Explain what acquisition indebtedness is with respect to a qualified residence of a taxpayer. Identify any limitations on the deductibility of interest expense on this indebtedness.

A.

Acquisition indebtedness is debt that is secured by the taxpayer's residence and is incurred in acquiring, constructing, or substantially improving the qualified residence of the taxpayer. For debt incurred on December 15, 2017 or later, acquisition indebtedness is limited to $750,000. Acquisition debt incurred prior to that date is limited to $1,000,000.

B.

Acquisition indebtedness is debt that is secured by the taxpayer's residence and can be incurred for any reason. For debt incurred on December 15, 2017 or later, acquisition indebtedness is limited to $1,000,000. Acquisition debt incurred prior to that date is not limited. However, any pre-December 15, 2017 acquisition indebtedness reduces the $1,000,000 limit.

C.

Acquisition indebtedness is debt that is secured by the taxpayer's rental property and is incurred in acquiring, constructing, or substantially improving the rental property of the taxpayer. For debt incurred on December 15, 2017 or later, acquisition indebtedness is limited to $500,000. Acquisition debt incurred prior to that date is not limited. However, any pre-December 15, 2017 acquisition indebtedness reduces the $500,000 limit.

D.

Acquisition indebtedness is debt that is incurred in acquiring, constructing, or substantially improving the qualified residence of the taxpayer. The debt can be secured by any assets owned by taxpayer. For debt incurred on December 15, 2017 or later, acquisition indebtedness is limited to $500,000. Acquisition debt incurred prior to that date is not limited. However, any pre-December 15, 2017 acquisition indebtedness reduces the $500,000 limit.

Explain what home equity indebtedness is with respect to a qualified residence of a taxpayer. Identify any limitations on the deductibility of interest expense on this indebtedness.

A.

Home equity indebtedness is any debt (other than acquisition indebtedness) that is secured by the taxpayer's qualified residence. It is limited to the lesser of $150,000 or the excess of the residence's FMV over the acquisition indebtedness and may be used for anypurpose, including acquiring the residence.

B.

Home equity indebtedness is any debt (other than acquisition indebtedness) that is secured by the taxpayer's qualified residence. Beginning in 2018, the interest on home equity indebtedness is not deductible.

C.

Home equity indebtedness is any debt (including the acquisition indebtedness) that is secured by any of the taxpayer's residences. It is limited to the lesser of $150,000 or the excess of the residence's FMV over the acquisition indebtedness and may be used for any purpose, including acquiring the residence.

D.

Home equity indebtedness is any debt (other than acquisition indebtedness) that is secured by any of the taxpayer's real estate holdings. It is limited to the lesser of $100,000 or the excess of the residence's FMV over the acquisition indebtedness and may be used for any purpose, including acquiring the residence.