Thank you so much for your response! It is so knowledgeable and informative! I assure you I am not trying to avoid taxability. This is my first cash-out refinance and I have little knowledge about interest and tax-deductible. I used to think it might be a "grace period" since the 2 loans happened at the same time. My refinancing bank did a poor job and totally changed my financial goal. I didn't expect it took 5 months to close a loan. But it is what it is. I truly appreciate your helpful advice about not claiming it against the purchase loan at this time. It sounds pretty dangerous and I am not risking myself in that scenario. Thank you for the notice again.
I am actively looking to buy another property for investment. The market right now is pretty calm since most families want to stay through the holidays. But I do expect more supply will be available after Christmas. It just hard to define what is "reasonable". And hope my plan is reasonable. Maybe before March is reasonable? Wish I could find a rule from IRS, black and white, I am so afraid of uncertainty. But now makes it complicated since it may cross the year. If I pay $5,000 interest for my primary resident loan in 2021, and I know I cashed 65K in 2020 and $3,000 closing cost. If I use the 65K to buy a house for rental in Feb 2021, can I still claim 55% of the interest in 2021 as cost against this new rental? Should I calculate the cost proportionally, like $5,000x55%x10/12 since it will be in February? How would that affect my 2020 return and how should I claim the cost in 2021 for a refinance in 2020...? I am sorry I have asked you so many questions!!!