Amy Paid the Following Interest Expense During the Current Year

question 84

Multiple Choice

Amy paid the following interest expense during the current year: $\begin{array}{llcc} \text {Qualified home mortgage interest } & \$5,000 \\ \text { Credit card interest } &\$1,000\\ \text { Personal bank loan interest } &\$3,000\\ \text { } &\\ \text { } &\\ \text { } &\\\end{array}$
What is the amount of Amy's interest deduction for the current year?

• A)$8,000
• B)$3,000
• C)$4,000
• D)$5,000
• E)$6,000

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Definitions:

Personal Exemptions

Deductions allowed by the IRS on income tax returns for the taxpayer and dependents, phased out in 2018 under the Tax Cuts and Jobs Act.

Marital Status

A legal and social status defined by being single, married, widowed, divorced, or separated, impacting tax filings and benefits.

Understatement of Tax

The act of reporting less tax than is owed on one’s income tax return, either unintentionally or through deliberate omission.

Negligence

A failure to exercise reasonable care or diligence, resulting in harm or damage; in tax terms, it refers to the lack of care in complying with tax laws, potentially leading to penalties.