"Since you first took out the loan, how much has been spent to buy, improve or build the home it's secured by? " Does buy= principle balance to pay original loan amount.

[Olive11]

This loan was a refinance.  Do I include the amount it took to pay off the original loan + home improvement costs.  Or do I only include the home improvement costs?

[Anita01]

It's the principle of the original loan, not what's left of the principle, assuming you used the entire loan originally to buy the house.

[TimSD]

Does Divorce and a buyout of the home count towards this? I refinaced and took my out and gave it to the X.

"Since you first took out the loan, how much has been spent to buy, improve or build the home it's secured by?"

[Cynthiad66]

Yes, you can only deduct the interest on the portion of the mortgage loan or line of credit that was used to buy, build or substantially improve your home. This is a new requirement for tax years 2018 through 2025.

You cannot deduct the amount of interest attributed to the amount of the loan used to pay off your credit card and car loan.  

The Tax Cuts and Jobs Act of 2018 changed both the type of mortgage interest that can be deducted as well as the amount of interest that can be deducted.

Acquisition Debt vs. Equity Debt

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Acquisition Debt is incurred in acquiring, constructing, or substantially improving any qualified residence of the taxpayer and must be secured by the taxpayer's residence.

Equity Debt is all other debt secured by the taxpayer's residence, such as home equity proceeds that are used to pay off credit card debt, purchase a vehicle, take a vacation, etc.

Under the TCJA, all equity debt is non-deductible, even if incurred prior to December 15, 2017. However, if the proceeds from home equity debt are used to buy, build, or substantially improve the property that secures the debt, the debt can be considered acquisition debt. Acquisition debt is deductible, but different rules apply depending on the date it was incurred.

[Heather1998]

So, if when we refinanced in 2016, we took cash out, what is the amount that I put in for the how much has been spent to buy, improve or build the home?  Is it the pay off amount on the closing disclosure?  Not the total amount of the new loan, right? @Cynthiad66 

Thanks

[ThomasM125]

@Heather1998 I'm not sure where you are seeing that question, but normally it applies to when you refinance a mortgage loan or take out a second mortgage. And the question normally refers to the loan proceeds. So, if you took the loan proceeds and spent all of it on the mortgage you refinanced or on improvements to your house, then you would enter the total amount of the new loan when asked how much has been spent to buy, improve or build your home.