Cash Out Refinance

[AmyC]

Correct, once you have paid off the loan and fixed the house and spent the rest, the percentages are set. So, as in your example, 75% of the mortgage interest each year would be deductible. You should keep your expenses together in case you are investigated. Those records are best kept in your separate financial folder rather than with your tax records. You do need to make a note that 75% is deductible moving forward.

[paulofoakland]

a wrinkle:
This happened before Dec 15 2017... according to the Help File on TurboTax CA, these "what did the money get used for" do not apply to those earlier mortgages.  is that just for CA or is that true of the Federal stuff too?

Also if my standard deduction amounts to more than the itemized deductions.... does that make this a moot (irrelevant) point?

[AmyC]

If standard wins, the interest is irrelevant, skip it. The federal laws changed. Publication 936 (2020), Home Mortgage Interest Deduction | IRS

@paulofoakland

[repeatrepeat123]

So if I cash out refi and use the cash to make future payments of principal or principal + interest on the home, does that make it deductible interest?  

For example, I refinance a 200K loan into a 250K loan and use the 50K to make the payments in that year?  

If I make those payments with 25K in the first year and 25K in the second year, is 225/250 of the interest deductible the first year and then all of it in subsequent years even if my balance on new loan is 210k after year 2 due to interest and points etc?

or do I have to wait until improvements or balance of the new loan is below the original loan to fully deduct that interest?

[lambda13]

It appears to be occurring in TurboTax 2021 as well.  When will you have a fix?

[lambda13]

Also this "TurboTax Help" link only goes to a "not found" page...can you please fix this link to the proper article?

[DaraLO]

@lambda13 That is indeed an old link that is no longer active.  Please clarify the exact issue you're experiencing so we can provide further assistance.