let me make this simpler.
the IRS does not care whether it's a HELOC, refi, cashout refi, etc.
What it cares about is 'aquisition debt' and 'equity debt'
your aquisition debt is the mortgage balance at the time you purchased the house, less the paydowns, plus any mortgage debt you took out to substantially improve your home. that is it.
example
1) purchased my home with a $200.000 mortgage. After 5 years the balance is $175,000.
2) I talk out a HELOC for $50,000, using half to improve the home and half to buy a car.
$225,000 is aquisition debt and the interest is tax deductible
$25,000 is equity debt and interest is not tax deductible.
as you pay down the HELOC, it is assumed that the 1st dollars paid off are equity debt.
