I did a home refinance with some money going to home improvements

[GeorgeM777]

Not sure what your question is but the cash you collect from a cash-out refinancing isn't considered income.  Therefore, you don't need to pay taxes on that cash. Instead of being considered income, a cash-out refinance is simply a loan. Depending on how you spend the money from a cash-out refinance, you might even be eligible for a tax deduction.

@spschaub

[spschaub]

My problem is with the deduction.  Using TT, when it asks me if ALL the refinance money went towards the purchase/improvement, I say no, but then it is supposed to allow me to enter the amount that DID, but the form isnt giving me that option, so I'm not getting ANY deduction on the mortgage interest.

[RaifH]

1. Answer No to Is this the original loan used to buy your property? 
2. Answer Yes to Is this loan a HELOC or a refinance? 
3. Answer Yes to Did you take cash out? 
4. Answer No to Have you used the money from this loan exclusively on this home?
5. Under Let's see how much interest you can deduct this year, select Help me figure this out.
6. Enter the amount used to acquire and substantially improve the home in the first field. The remaining amount should have been cashed out and used as home equity debt.
7. Enter the balance as of January 1, 2022

According to the IRS, only home acquisition debt is deductible. As you pay down your mortgage, the home equity debt is paid off first. Only once that amount is completely paid off do you start paying down the principal on your home acquisition debt.