Posted on: 01st Aug, 2005 10:19pm
When the rate of interest declines, it becomes profitable for the borrowers to refinance. However, before plunging into refinancing, it is important to know its tax implications. This helps you in proper tax planning. Tax deductions on refinancing depend on the refinance loan proceeds and how these proceeds are used. There are two cases.
Home acquisition loans
If you use the cash out refinance proceeds for improving the principal residence or for a second home, then it comes under home acquisition loans. The interest payments that you make for this loan are tax-deductible. This deduction is available up to a loan limit of $1000000 for an individual. For married couples filing separate returns, this limit is $500,000.Consumer loans
If the loan proceeds are used for purposes other than home related matters, then these come under consumer loans. These may include auto loans, credit card bills, personal debts, medical expenses. Interest paid on the loan used for these purposes is not tax deductible.
Anonymous
Posted on: 01st Aug, 2005 10:19 pm
is the cash obtained from refinance taxable?
Borrowed money is never taxable.
this discussion is 8 years long and running!
if i add a relative to the title, then cash-out refinance and later quit-claim title to a relative (who assumes the loan entirely) do i have to pay taxes on any of it?
and also where would i get such a loan, that could be assumed in such a way
if i add a relative to the title, then cash-out refinance and later quit-claim title to a relative (who assumes the loan entirely) do i have to pay taxes on any of it?
and also where would i get such a loan, that could be assumed in such a way
Hi IndianaLones,
You may be liable for property transfer taxes and other associated fees. Also, if it's a gift transfer and if you cross the exemption limits, then you may be liable for paying gift taxes.
You may be liable for property transfer taxes and other associated fees. Also, if it's a gift transfer and if you cross the exemption limits, then you may be liable for paying gift taxes.
Thanks! The property has about $200k in loans and is worth about $500k. Any idea where I could get one of these assumable refis?
Hi Indiana,
Well, if your mortgage docs mention the fact that the loan is assumable, then only someone else will be able to assume the loan. You should check the mortgage docs carefully for the same.
Thanks
Well, if your mortgage docs mention the fact that the loan is assumable, then only someone else will be able to assume the loan. You should check the mortgage docs carefully for the same.
Thanks