What percentage of the interest paid on a combined mortgage and home equity loan can a taxpayer deduct if the total does not exceed the cost of the home?

The correct answer to the question regarding the percentage of interest that a taxpayer can deduct for a combined mortgage and home equity loan, provided the total does not exceed the cost of the home, is 100%.

Homeowners can generally deduct the interest paid on their mortgage and home equity loans, as long as the combined total of these loans does not surpass the home's cost, which means that the loans are still considered "qualified residence indebtedness." The Tax Cuts and Jobs Act allows for full deductibility of the interest on home acquisition debt, which includes both the primary mortgage and home equity loans used to buy, build, or substantially improve the homeowner's principal residence up to the total value of the home.

This provision is crucial for taxpayers to understand, as it significantly impacts their tax obligations and potential savings. If the combined debt is within the threshold, as stated, the taxpayer can deduct 100% of the interest paid, promoting home ownership and investment in property improvements.