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

Question

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?

Max T. · Answer

@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.

Kyle J. · Answer

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 · Answer

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

Kyle J. · Answer

@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.)

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

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