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David Presson, CFA, Senior Vice President and Director of Investments, First Bank Wealth Management 's Articles

Refinancing and Home Equity Loans: Tax Considerations

What are the tax considerations associated with refinancing and home equity loans? Generally, interest paid on loans to acquire an existing home or to construct a new home is tax deductible ,with certain limitations.  In addition, interest paid on refinanced mortgages is deductible (also subject to certain limitations). Can you deduct interest paid on refinanced mortgages? If you refinance the current principal balance owed on a mortgage secured by your primary or secondary residence (a no-cash-out refinance), interest on the refinanced loan will be deductible to the same extent as was the interest on the old loan. If, however, the refinanced loan is for more than you owed on the old loan (a cash-out refinance), deductibility of interest on the amount of the loan that exceeds the principal balance of the old loan is determined as follows:  If you use the excess amount to buy, build, or substantially improve your first or second residence, the excess amount is treated ...

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