Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.
So, if I understand you correctly you own your house outright, but then are getting a mortgage to buy out your spouse in a divorce
Yes, you will be able to deduct the interest on the new mortgage you are getting to buy your spouse out
Mortgage interest is deductible on schedule A. YOu will have to itemize your deductions to get the benefit.
I do itemize. Is there a limit on the amount of the mortgage to deduct the interest?
Do you know if it is the same for California and well as Federal?
You may only deduct interest on a mortgage up to 1,000,000
And yes, it's the same for both federal and state
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