After conferring with my trusted colleague OPUS 17, I must revise my original answer to this post. You won't be able to claim mortgage interest expense for the refinanced loan because you used the money for something other by building or substantially improving your home. Stock investments do not qualify for a mortgage interest deduction.
In addition, you will not be able to deduct your investment interest expenses unless your investments earned income in 2020 or appreciated in value. If your investments earned income in 2020, you may be able to deduct investment expenses up to the amount of the investment income. In this case, you money you used from the REFI loan used to purchase the investments can be claimed up to the amount of income the investments produced. You may report the entire cost to you for the investment and any expense over and above the income will be carried over into the following year. Please read this Turbo Tax link for more information. Be sure to maintain accurate records regarding the reporting of your expenses because of the tracing rules that IRS requires for these types of transactions. Opus 17 has outlined these in detail in a post in this thread.
If you have income from these investments you purchased, you can report the expenses by going to:
- Log into Turbo Tax
- Type in 4952 in the search bar at the top of the program. Be sure to press enter after you have done this.
- Click on jump to 4952 and start recording your information.
[Edited 03-18-2021|05:17 PM PST]
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