What are the tax implications of getting cash out when refinancing?

Cashing out of your main home is a great tax strategy if you're using the proceeds to pay off other debt on which the interest is not deductible.

An individual is allowed to take out up to $100,000 from their principal residence in addition to the original debt used to buy the home, and deduct the interest charged before it is repaid. For more information on this, check out IRS Publication 936 Home Mortgage Interest Deduction.

This strategy is a winner since it allows the homeowner to possibly refinance other debt that may be at a higher interest rate than rates available on a second mortgage, allows the homeowner to receive a tax benefit by deducting the interest on the loan which in effect let's the government pick up part of the tab on the loan repayment, and lastly, it allows the homeowner to remain in his current home which he may feel he would have to otherwise sell to cash out. The rules are different on cashing out of a rental property.

These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.

Dynamic Content Powered by Service2client.com
SEO Content Powered by DynamicPost.net