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Gabriel is not entitled to head of household filing status in 1995
and 1996, and Morhaf is not entitled to head of household filing
status in 1995.
Mortgage Interest Deductions
Section 163(a) allows a deduction for all interest paid or
accrued within the taxable year on indebtedness. Section
163(h)(1), however, provides that, in the case of a taxpayer other
than a corporation, no deduction is allowed for personal interest.
Qualified residence interest is excluded from the definition of
personal interest and thus is deductible under section 163(a).
See sec. 163(h)(2)(D). Qualified residence interest is any
interest which is paid or accrued during the taxable year on
acquisition indebtedness or home equity indebtedness. See sec.
163(h)(3)(A). Acquisition indebtedness is any indebtedness
secured by the qualified residence of the taxpayer and incurred in
acquiring, constructing, or substantially improving the qualified
residence. See sec. 163(h)(3)(B). Home equity indebtedness is
any other indebtedness secured by the qualified residence to the
extent the aggregate amount of such indebtedness does not exceed
the fair market value of the qualified residence reduced by the
amount of acquisition indebtedness on the residence. See sec.
163(h)(3)(C)(i). The amount of home equity indebtedness for any
taxable year cannot exceed $100,000. See sec. 163(h)(3)(C)(ii).
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