No, the interest on any cash you took out of your second home in a refinance to purchase the adjacent lot would not be tax-deductible.
Unless the money is used to buy, build, or substantially improve the home it is not considered acquisition debt and therefore not deductible. For full details on this subject, please see IRS Publication 936.
In order to correctly enter the mortgage interest in TurboTax, please follow these steps:
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With your return open, search for 1098 and select the Jump to link in the search results
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Follow the instructions to enter your 1098 information
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For the refinanced loan, under Let’s get some details about this loan, answer No to Is this the original loan you used to buy your property?
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Answer Yes to Is this loan a home equity line of credit or a refinance of a previous loan
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Answer Yes to Did you take cash out when you got this loan?
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Answer No to Have you used the money from this loan exclusively on this home?
