Level 3

I have a client with a mortgage originally taken in 2015 for $968k.  There is $820k remaining.  He is currently able to deduct 100% of the interest since it's a pre 12/16/2017 mortgage and under the $1M limit.

He would like to refi and take $100k out to remodel kitchen and other improvements in the home (new loan is $920k).   This is not a cash-out.

Question:  Can he still deduct 100% of interest on loan because he is under $1M and "grandfathered" with the old limit since the original loan was pre- 12/16/2017? The amount of the new loan is below the original mortgage.

My research so far in pub 536 is inconclusive.  

I found two random websites that suggest he could deduct 100%, but I hate to rely on random Google searches..  but I guess I'll rely on a stranger on this board to help me answer it instead!   🙂

But seriously, I would love some viewpoints on how folks have handled this.

Links below on what I found



  1. See Tim Todd quote in this link: Did you refinance your mortgage last year? Here’s how it could affect your taxes - MarketWatch
  2. See Evan Liddiard quote in this link:  Mortgage Interest Deduction: Who Gets It? - WSJ
  3. Pub 936 reference I found is below, which suggests the "home acquisition debt" after refi is only the $820k loan balance right before refi. But maybe since the $100k is used to substanitally improve the home, it is Home Acquisition debt, but the Publication does not say which limit would apply ($1M or $750k or remaining balance on original loan...) 

Refinanced home acquisition debt.  Any secured debt you use to refinance home acquisition debt is treated as home acquisition debt. However, the new debt will qualify as home acquisition debt only up to the amount of the balance of the old mortgage principal just before the refinancing. Any additional debt not used to buy, build, or substantially improve a qualified home isn't home acquisition debt.

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