When I purchased my homeA, I did so using the following:
- Down payment
- Loan under my name for the homeA
- Cash-out refinance loan under my parents name on their homeB.
I have been paying off the loan under homeA and under homeB and deducting mortgage interest since the beginning of those loans. When I had a CPA at the beginning, she confirmed that this was appropriate.
This year I would like to do a new cash-out refinance under homeA to fully payoff the loan for homeB. I understand that in typical circumstance, a interest on the cash-out portion is only deductible if it is used to improve the home. However, in this case I am consolidating 2 loans on my home and would not be using the cash for any other purpose. Would I still be able to deduct the full interest of the new cash-out refinance on homeA?
