Mortgage Limit for Post 2017 refinance of Pre 2017 original mortgage

[zomboo]

I know everyone including tax experts and even Turbo Tax believe the $1M acquisition debt limit for pre-2017 mortgages applies when the pre-2017 mortgage is refinanced after December 2017. My question is how did this become the accepted norm?

Pub 936 classifies mortgage debt as either Grandfathered Debt or Acquisition Debt. Acquisition Debt is debt that originated after October 13, 1987. The publication sets acquisition debt limit at $1M for mortgages originating after Oct 13, 1987 and before Dec 16, 2017 and $750K for mortgages originating after after Dec 15, 2017.

Pub 936 states 'Any secured debt you use to refinance home acquisition debt is treated as home acquisition debt.' but it does not state the refinancing mortgage retains the acquisition debt limit of the original mortgage. The refinancing luxuries of Grandfathered debt are not provided for Acquisition debt in Pub 936.

I am asking for anyone, especially experts, to explain how I am getting this wrong.

[RobertB4444]

The logic is that refinancing a home mortgage is not considered the origination point and that the refinance does not reset your origination point.  Your logic, that it is a new loan with a new origination point, is also sound.  When the IRS guidelines don't cover a specific it is logical to take the terms most favorable.  Since the IRS doesn't specifically say that a refinance resets the loan origination date we have all been operating as though it does not.  And until the IRS issues more firm guidance we will continue to do so.

@zomboo 

[zomboo]

Thank you @RobertB4444 for taking the time to explain the reasoning behind applying the $1M pre-2017 mortgage limit to post-2017 refinances. I do feel that this should be the case and that it is a reasonable interpretation of Pub 936. After all, it is the same acquisition balance, qualifying home, and ownership interest.

However, there seems to be conditions when the refinance mortgage includes a cash out that will cause the refinanced pre-2017 acquisition balance to lose it's pre-2017 status. Are there cash-out conditions that will cause this to happen? Are there situations where a mortgage can have both pre-2017 and post-2017 acquisition debt?

[RobertB4444]

No, mortgages with pre-2017 acquisition dates still keep their start dates even with the cash out refinance.  Until the IRS tells us different.

@zomboo