here is how it should work:
let's say you bought a home for $200,000 with a $150,000 mortgage.
Then in 2016, when the remaining mortgage balance was $125,000, you refinanced the mortgage to $175,000. (so cash out!).
Then in 2019, when the mortgage balance was $165,000, you refinanced the mortgage to $200,000. So cash out again!
for 2019, the mortgage balance that was used to purchase / improve the home is $125,000 (I assume none of the cash out dollars was used to improve the home), meaning the interest related to $75,000 is not deductible.
As time moves forward and you pay down the mortgage, it;s the $75,000 that gets paid down first, so the percentage of interest that is deductible keeps going up.
p.s. if you are taking the standard deduction, none of this matters!!!!
