Javier and Anita Sanchez purchased a home on January 1 of year 1 for $1,000,000 by paying $200,000 down and borrowing the remaining $800,000 with a 6 percent loan secured by the home. The Sanchezes made interest only payments on the loan in years 1 and 2. (Leave no answer blank. Enter zero if applicable.)

c. Assume year 1 is 2018 and by the beginning of year 4, the Sanchezes have paid down the principal amount of the loan to $500,000. They borrow $100,000 using a loan secured by the home in order to finish their basement. The new loan carries a 7 percent interest rate. What amount of interest can the Sanchezes deduct on the $100,000 loan?

Maximum deductible interest expense = ???