Cash out refi tax question

[David Bennett]

Hi All -

Apologies if this has been discussed 10,000 times before, I searched the forums and struggled to find an answer to my exact questions. I plan on speaking to an accountant closer to tax time, but figured I’d start with some of the knowledgeable folks here.

My questions:

- Is the interest on a cash-out refi on a rental tax deductible?

- Is interest from any refinance on a rental tax deductible?

Thanks so much!

David

[James Mc Ree]

The interest from a cash out refi on a rental is tax deductible provided you use the cash out funds for capital improvements of the rental. Use of the funds to renovate the property would be deductible. Use of the funds to buy another property or something separate from the rental property would not be deductible.

A rate and term refinance with no cash coming out preserves the tax deductibility of the mortgage interest.

Reference: https://www.rocketmortgage.com...