Question by Leo L: Can I use interest from Cash Out Refinance on tax deduction?
I have mortgage amount in $ 50,000, and credit card debt in $ 30,000. I am planning to do cash out refinance and put mortgage & C/C debt together ($ 80,000). I am just wandering how I can use interest amount on tax deduction. Do I need to track dawn interest amount on $ 50,000(from original mortgage on home ) or I can not use any interest amount on Cash Out Refinance.
Before I make final decision, I would appreciate your advice.
Answer by card-ron
I assume you mean you are refinancing your mortgage and, based on the equity in your home, refinancing for a greater amount than your current mortgage (using the extra to pay off credit cards). If this is the case, the entire amount is considered a mortgage and any interest paid is deductible as mortgage interest.
Know better? Leave your own answer in the comments!
For 1040 purposes, the interest is deductible.
For AMT purposes, the interest is added back to income.