Do you have to pay taxes on a cash out refi?

4 Replies

I am about to close on the refinance of my house. We bought it for 190k, did a massive amount of rehab ourselves, and just got appraisal today at 345k. After the 69k left in the loan for the 20% do I have to pay taxes on the 94k remaining cash I plan on taking out?

@Chase Burkett You don’t have to pay taxes on the proceeds from a cash-out refi. It’s not considered income. It’s a loan that you have to pay back. 

(Congrats on your new appraisal and equity position by the way.)

Originally posted by @Chase Burkett :

@Kyle J. So I would have to pay back the 94K?

It was my understanding, based on the title of your post, that you were asking about a cash-out refi loan.

So if you take additional money out via a cash-out refi loan ($94k or however much it ends up being), of course you’ll have to pay it back. The bank is just loaning you that money (hence the reason it’s not taxable).

@Chase Burkett

No you are taking out a mortgage. It’s not a taxable event. It’s a loan that you(r tenants) will be paying back little by little each month with that new higher monthly payment.

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