Michaela owns a principal residence in Georgia, a townhouse in San Francisco, and a yacht in Cape Cod. All of the properties have

mortgages on which Michaela pays interest.

a$.$ For which residences can Michaela deduct mortgage interest?

Principal residence plus one of the two other residences $$

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Qualified residence interest is interest paid or accrued during the taxable year on indebtedness $($subject to limitations$)$ secured by any property

that is a qualified residence of the taxpayer.

b$.$ What are the limitations on Michaela's mortgage interest deduction? What strategy should Michaela consider to maximize her mortgage

interest deduction?

Michaela's deduction is limited to interest on acquisition indebtedness up to

$$ if the debt existed at December $15,2017$

or

$x$ if incurred after that date. Therefore, she should choose the second residence that will result in the

highest grad$$ interest deduction.