Mortgage refinance Tag

14 Mar Tax Fact 5-Refinance Debt for Improvements is Excludable

IRS tax fact number 5 tells us that refinanced debt proceeds used for the purpose of substantially improving your personal residence qualify for exclusion from income if the debt is later is cancelled. In other words, if you re-finance your principal residence home mortgage and use the excess funds (the portion not used to pay off your old mortgage) for substantial improvements to your home, any of that debt, if cancelled, qualifies for the exclustion. The use of loan proceeds is clearly important in determining whether or not later debt cancellation results in taxable income.
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