Yes, you are correct that you can deduct the interest on the $1 million. When you refinance your loan you are capped at the amount of interest you can deduct to the principal balance on the loan when you refinanced it.
For example if your principal balance due at the time of refinance was $950,000 and then your refinanced and increased the loan to $1 million you can only deduct the amount of interest for the $950,000.
Deducting Mortgage Interest FAQs
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