If the full amount of loan B was originally used to pay for part of Home A, then yes. If not, then no.
Say Loan B has a balance of $100,000. Home A had an original balance of $225,000, all of which was used to purchase Home A, but it now down to $175,000. The original amount you took out of Home B was $120,000 and you have paid it down to $100,000, again, all of this was used to purchase Home A. You are going to take $100,000 out of Home A to pay the $100,000 you still owe on the balance that was all used to buy Home A. Your new loan amount will be $275,000 (100K+175K) . In this scenario, the interest on the entire $275,000 is tax deductible. You are simply consolidating the loans.
Say however, home B has a balance of $100,000, but the original balance was $150,000. This consisted of $75,000 remaining balance on Home B's loan and $75,000 for home A. You then still owe $175,000 on the Home A loan which was used entirely to buy Home A. Your new loan for Home A will still be $275,000, however, interest on $50,000 of that loan will not be deductible since half of the original loan was originally used to pay for Home B. Only the interest on the $225,000 that was directly used to purchase Home A would be deductible.
Any amount that was originally used to purchase Home A is deductible.
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