For Line C in the Home Mortgage Interest worksheet, answer yes for the first mortgage. The help section that is shown below for the worksheet says that you don't need to answer the question. You can see this section by Clicking on Help Center in the Upper right corner while viewing the worksheet.
Line C: For a home equity loan (HELOC), answer Yes if all proceeds from the loan were used to pay for improvements to this home, or to pay off loans used to purchase or build this home. Otherwise, answer No.
For a refinanced loan, if no cash was ever taken out at the time of refinance, this question does not need to be answered. If cash was taken out, answer Yes only if the cash was used to pay for home improvements or to pay off other loans that were used to build, buy, or improve this home. If cash was used for any other purpose, answer No.
The amount used to buy, build, or improve a home (or "acquisition debt") is limited to the value of any new loan taken out. For a refinance, this can make it challenging to determine what amount is acquisition debt.
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