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.

a) Assuming year 1 is 2017, how much interest would the Sanchezes deduct in year 2?

b) Assuming year 1 is 2022, how much interest would the Sanchezes deduct in year 2?

c) Assume year 1 is 2022 and by the beginning of year 4, the Sanchezes have paid down the principal amount of the loan to $500,000. In year 4, they borrow an additional $100,000 through a loan secured by the home in order to finish their basement. The new loan carries a 7 percent interest rate and is termed a home equity loan by the lender. What amount of interest can the Sanchezes deduct on the $100,000 loan?

d) Assume year 1 is 2022, and by the beginning of year 4, the Sanchezes have paid down the principal amount of the loan to $500,000. In year 4, they borrow an additional $100,000 through a loan secured by the home in order to purchase a new car. The new loan carries a 7 percent interest rate and is termed a home equity loan by the lender. What amount of interest can the Sanchezes deduct on the $100,000 loan?