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Case Study 1: Mortgage InterestFrom 2011 through 2014, Alfredo and Cindy Kendall obtained home equity loans totaling $91,000. Alfredo and Cindy used the loans to pay off gambling debts, overdue credit payments, and some nondeductible medical expenses. The current balance of Alfredo and Cindy's home equity loan is $72,000. The fair market value of their home is $230,000, and they carry $30,000 of outstanding acquisition debt on the home. If Alfredo and Cindy file a joint return, can they deduct the interest they pay on these loans? Click here for an explanation. No, Cindy and Alfredo Kendall cannot deduct the interest on their loans because the total of these loans was not used to build, buy, or improve the taxpayer's qualified residence. Use the flow chart – Is My Home Mortgage Interest Fully Deductible? – in Publication 936 to determine if the interest should be included on Schedule A. 
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