Cash- Out Refinance

[terrie]

Refinanced a $530,214 mortgage at the end of 2019 to include cash out of $328,654.  New mortgage is now $858,868 at an interest rate of 4.5%.  The cash out was not used for home improvements.  My Form 1098 from new lender shows total interest paid for 2020 based on the entire $858,868.  I know I cannot deduct interest on the cash out of $323,654, but can I deduct interest on the $530,214?  How would I figure out how much interest to deduct and how would I do this on turbo tax?  Turbo tax only asks for total interest and if any portion of cash out was used for home improvements.  When I answer that the cash out was not used for home improvements, it appears to now allow any write off of any portion of the loan.  

[NCperson · Accepted solution]

it is rather simple: 

that part that is  deductible is the $530,000 / $859,000 times the total interest. 

each year you will do that same calculation and as the $859,000 amortizes,  a higher percentage of the interest will be deductible. 

I would just enter the result of the calculation into turbo tax and then answer that there was no cash out.