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Mr. and Mrs. Perry own three personal residences, all of which are subject to an acquisition mortgage. The mortgage on the first residence is $290,000, the mortgage on the second residence is $400,000, and the mortgage on the third residence is $357,000. Which of the following statements is true?

A. Mr. and Mrs. Perry can report an itemized deduction for the interest paid on all three mortgages.

B. The Perrys’ itemized deduction is limited to the interest on $1 million of their acquisition debt.

C. The Perrys’ itemized deduction is limited to the interest on the $400,000 mortgage.

D. None of the statements is true.

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Answer: D. None of the statements is true.

Explanation:

When multiple residences are owned, tax laws indicate that itemized deductions for interest paid on mortgages are limited to the mortgages of 2 residences alone being the primary residence and any other residence that will be chosen as the second residence in the tax year.

As such, all the options are wrong as they would be limited to itemized deductions on mortgage interest for;

= $290,000 + $400,000

= $690,000 being the first 2 residences

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