Home Acquisition Debt and Home Equity Debt

[Kram BergGold]

My clients HA debt is 1 million and $27,000. His HE debt is only $60,000. Can he deduct all the interest as total debt is under 1.1 million or is the interest on the $27,000 not deductible? If it is deductible is it subject to AMT like other home equity debt?

[New York Enrolled Agent]

I think Rev Ruling 2010-25 will answer your question.

[Kram BergGold]

What about AMT?

NYEA, I read the Rev Ruling so my client gets to treat excess acquistion debt as home equity. To me, this means the interest applicable to that debt is subject to AMT like other home equity interest. Does anyone disagree?

[mactoolsix]

NYEA, I read the Rev Ruling so my client gets to treat excess acquisition debt as home equity. To me, this means the interest applicable to that debt is subject to AMT like other home equity interest. Does anyone disagree?

Yes, that is correct.
In your example, 1,000,000 is acquisition debt, and 87,000 is equity debt subject to AMT.

He can take out another 13,000 which would maximize his equity debt.

Mike