Hi Vanessa,
I know this thread is a little old, but it's our first time to deal with this, as we refinanced in 2020.
As far as 'substantially improving your home', I get it that it's the principal pay-off amount PLUS any money used to make improvements to the home. In our case, the principle that our new loan paid off was $392K. Our new loan via refinance was for $450K, so ~$58K cash out.
My question is defining the additional money used to make physical improvements in addition to the principle pay-off amount. We got the proceeds from the refinance around Nov 1, 2020. Does this mean we can only include physical improvements to our home from that date through Dec. 31, 2020? Or does it include all upgrades to our home from Jan. 1 through Dec. 31st 2020? Or even all improvements to the home from the beginning of the original loan (2016 for us) through Dec. 31st, 2020?
Finally, for our 2021 tax return (thinking ahead to understand things better), would we simply put in improvements done in 2021 alone or would it be cumulative from the beginning of the refinance (or original loan, depending on your answer to above)?
Thank you for clarifying this!
Best,
Nick
