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Part $1$

Explain what acquisition indebtedness is with respect to a qualified residence of a taxpayer. Identify any limitations on the deductibility of interest expense on this indebtedness.

A$.$

Acquisition indebtedness is debt that is secured by the$$ taxpayer's rental property and is incurred in$$ acquiring, constructing, or substantially improving the rental property of the taxpayer. For debt incurred on December$15,2017$ or$$ later, acquisition indebtedness is limited to$$ $$500,000.$ Acquisition debt incurred prior to that date is not limited$.$ However, any$$ pre$-$December $15,2017$ acquisition indebtedness reduces the$$ $$500,000$ limit$.$

B$.$

Acquisition indebtedness is debt that is incurred in$$ acquiring, constructing, or substantially improving the qualified residence of the taxpayer. The debt can be secured by any assets owned by taxpayer. For debt incurred on December$15,2017$ or$$ later, acquisition indebtedness is limited to$$ $$500,000.$ Acquisition debt incurred prior to that date is not limited$.$ However, any$$ pre$-$December $15,2017$ acquisition indebtedness reduces the$$ $$500,000$ limit$.$

C$.$

Acquisition indebtedness is debt that is secured by the$$ taxpayer's residence and is incurred in$$ acquiring, constructing, or substantially improving the qualified residence of the taxpayer. For debt incurred on December$15,2017$ or$$ later, acquisition indebtedness is limited to$$ $$750,000.$ Acquisition debt incurred prior to that date is limited to$$ $$1,000,000.$

D$.$

Acquisition indebtedness is debt that is secured by the$$ taxpayer's residence and can be incurred for any reason. For debt incurred on December$15,2017$ or$$ later, acquisition indebtedness is limited to$$ $$1,000,000.$ Acquisition debt incurred prior to that date is not limited$.$ However, any$$ pre$-$December $15,2017$ acquisition indebtedness reduces the$$ $$1,000,000$ limit$.$

Part $2$

Explain what home equity indebtedness is with respect to a qualified residence of a taxpayer. Identify any limitations on the deductibility of interest expense on this indebtedness.

A$.$

Home equity indebtedness is any debt$($other than acquisition$$ indebtedness$)$ that is secured by any of the$$ taxpayer's real estate holdings. It is limited to the lesser of$$ $$100,000$ or the excess of the$$ residence's FMV over the acquisition indebtedness and may be used for any$$ purpose, including acquiring the residence.

B$.$

Home equity indebtedness is any debt$($other than acquisition$$ indebtedness$)$ that is secured by the$$ taxpayer's qualified residence. Beginning in$2018,$ the interest on home equity indebtedness is not deductible unless the proceeds are used for home$$ improvements, in which case it is treated as part of the acquisition debt.$$

C$.$

Home equity indebtedness is any debt$($other than acquisition$$ indebtedness$)$ that is secured by the$$ taxpayer's qualified residence. It is limited to the lesser of$$ $$150,000$ or the excess of the$$ residence's FMV over the acquisition indebtedness and may be used for any$$ purpose, including acquiring the residence.

D$.$

Home equity indebtedness is any debt$($including the acquisition$$ indebtedness$)$ that is secured by any of the$$ taxpayer's residences. It is limited to the lesser of$$ $$150,000$ or the excess of the$$ residence's FMV over the acquisition indebtedness and may be used for any$$ purpose, including acquiring the residence.