On the question, "Is this loan a home equity line of credit or a loan you've ever refinanced?", I have refinanced my mortgage before, but is that "this loan"?

[rainman]

I have refinanced before but trying to understand if "this loan" refers to the current mortgage, or the previous? The cash out refinance was in 2019 so not sure if it even applies to this question or not.

[ErnieS0]

“This loan” applies to the Form 1098 you are entering into TurboTax at that point. If you only have one mortgage, then you would select Yes, this is a loan I've refinanced or a home equity line of credit (HELOC) if this loan was refinanced in 2019.

TurboTax asks this because your mortgage interest deduction may be limited.

You can only deduct the interest from the amount of your loan that's been used to buy, build, or substantially improve the home that it's secured by — meaning the property that acts as collateral for the loan to protect the lender.

If you've ever used part of this loan to pay for things other than this home, you can't deduct the interest from that amount of the loan, even if the transaction didn't take place this year.

Examples of common ways you might have used this money not on your home include:

• Making a down payment on a different home
• Funding improvements on a different home
• Making a payment on a different loan or debt
• Having miscellaneous large purchases

Example: John took out a home equity line of credit on his main home on for $40,000. He used $25,000 to remodel his main home, and $15,000 as a down payment on a second home. He can only deduct the interest he paid on $25,000 he used to improve his main home.

[FlatulentTax]

Rainman, I had this exact same question at least two years in a row and I can't recall what I decided last year.

ErnieS0, you said "“This loan” applies to the Form 1098 you are entering into TurboTax at that point." But in my case, the form I'm entering is itself a refinance. Therefore neither of the two choices Turbotax provides are accurate:

Yes, this is a loan I've refinanced or a home equity line of credit (HELOC).

No, this is the original loan I used to buy or build my home.

I have never refinanced this loan, but it's also not the original loan I used to buy my home. The wording really needs clarifying in my opinion. The pop-up help box, like a lot of them this year, was blank and therefore useless.

Now, about your next statement:

"You can only deduct the interest from the amount of your loan that's been used to buy, build, or substantially improve the home that it's secured by — meaning the property that acts as collateral for the loan to protect the lender."

If I'm reading you correctly, I can deduct the interest from the total amount of the loan, even though it's a refi, because it was all used to buy my home (well, and to pay for the loan itself -- all the settlement charges). For that reason I'm assuming I can say this is the original loan I used to buy my home. Correct? I think that's what I chose last year, too.

[AmyC]

Since the loan you are inputting is not the original, it was a refinance- this is irrelevant if all the interest is deductible since this is for the program to calculate and ask questions, not for the tax form. If the balance is below $750,000 on your home, the full amount would be deductible since all used for home.

You want the total of your mortgage interest that is allowable. See Sched A line 8 instructions here. 

Publication 936 (2020), Home Mortgage Interest Deduction | IRS

@FlatulentTax