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What if partial of the 20K was used in the future for home improvements? I update the mortgage figures during the year of the home improvement? Originally 180K in 2020 for house now 190K in 2021 - originally 20K in 2020 for debt now 10K in 2021.
Interest is only deductible on acquisition debt -- debt used to buy, build or substantially improve your home. You have to go back to the home purchase and trace the balances of the loans.
For example:
1. You buy the home for $180,000 including $30,000 down and a $150,000 mortgage. That $150,000 is your acquisition debt.
2. You take a cash out refinance for $200,000. At the time of the refinance, the remaining balance on the first mortgage was $140,000. Your acquisition debt is now $140,000.
3. You can include in your acquisition debt, money spent on improvements that were made up to 90 days before the refinance or up to 2 years after the refinance. If you spent $20,000 on improvements within the correct time frame, your acquisition debt is now $160,000.
4. As you pay the mortgage, you can consider that you pay equity debt first. So, suppose that after 1 year, you refinance to get a lower rate. Your old balance is paid down to $195,000, you can consider that your acquisition debt is still $160,000. If you refinance for $195,000 to get a lower interest rate, your acquisition debt is still $160,000.
In the end, that means that 160/195, or 82% of your interest is deductible. Turbotax should help with this calculation.
No, if the loan is not used to buy, build, or improve, you can't deduct the interest.
As long as a portion of prior loan was used for debt, you will always need to adjust for that portion, when you refinance
For tax years 2018 through 2025, you can only deduct the interest from the amount of your loan that was used to buy, build, or improve the home that it’s secured by.
If you’ve ever used part of this loan to pay for things other than this home, you cannot deduct the interest from that amount of the loan, even if the transaction didn’t take place this year.
Don’t worry, we’ll help figure out what amount of interest you can deduct. Answer the questions on the worksheet accurately so the Turbotax can figure the deductible amount .
Examples of common ways you might have used this money not on your home include:
No, if the loan is not used to buy, build, or improve, you can't deduct the interest.
As long as 20,000 was used for debt, you'll always need to adjust for that portion, even when you again refinanced.
What if partial of the 20K was used in the future for home improvements? I update the mortgage figures during the year of the home improvement? Originally 180K in 2020 for house now 190K in 2021 - originally 20K in 2020 for debt now 10K in 2021.
Interest is only deductible on acquisition debt -- debt used to buy, build or substantially improve your home. You have to go back to the home purchase and trace the balances of the loans.
For example:
1. You buy the home for $180,000 including $30,000 down and a $150,000 mortgage. That $150,000 is your acquisition debt.
2. You take a cash out refinance for $200,000. At the time of the refinance, the remaining balance on the first mortgage was $140,000. Your acquisition debt is now $140,000.
3. You can include in your acquisition debt, money spent on improvements that were made up to 90 days before the refinance or up to 2 years after the refinance. If you spent $20,000 on improvements within the correct time frame, your acquisition debt is now $160,000.
4. As you pay the mortgage, you can consider that you pay equity debt first. So, suppose that after 1 year, you refinance to get a lower rate. Your old balance is paid down to $195,000, you can consider that your acquisition debt is still $160,000. If you refinance for $195,000 to get a lower interest rate, your acquisition debt is still $160,000.
In the end, that means that 160/195, or 82% of your interest is deductible. Turbotax should help with this calculation.
No, if the loan is not used to buy, build, or improve, you can't deduct the interest.
As long as a portion of prior loan was used for debt, you will always need to adjust for that portion, when you refinance
For tax years 2018 through 2025, you can only deduct the interest from the amount of your loan that was used to buy, build, or improve the home that it’s secured by.
If you’ve ever used part of this loan to pay for things other than this home, you cannot deduct the interest from that amount of the loan, even if the transaction didn’t take place this year.
Don’t worry, we’ll help figure out what amount of interest you can deduct. Answer the questions on the worksheet accurately so the Turbotax can figure the deductible amount .
Examples of common ways you might have used this money not on your home include:
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