Cash from Refinance - Taxable?

Guest 0.10 Dollars($)

is the cash obtained from refinance taxable?

Jessica · Posted: Mon Aug 01, 2005 11:10 pm Post subject: RE:

Hi Sara
Welcome to MortgageFit forum.

Whether the cash obtained from refinancing is taxable or not depends on whether the refinance has occurred before or after any exchange of property. If the pre-exchange refinance is executed as a part of exchange transaction, the cash received will be treated as cash ("boot") received by disposing the relinquished property. Hence the cash is regarded as taxable income.

But if refinancing occurs after the property exchange when he has been given the title of ownership of the property, the cash obtained is not treated as taxable income.

The major difference between pre and post-exchange refinancing lies in the repayment of debts. In a pre-exchange refinancing, a tax payer is free from the obligation upon the transfer of the relinquished property. But in a post-exchange refinancing, the tax payer is required to pay off the debt.

Hope you will be benefited from this information.

Please feel free to write back with further queries.

Regards,
Jessica.

Guest 0.10 Dollars($)

will I get any tax benefit if go for cash out refinance?

Jessica · Posted: Wed Aug 03, 2005 11:20 pm Post subject: RE:

Hi Jackson

When you opt for a cash-out refinance, you avail more cash than your unpaid mortgage balance. This additional amount is considered as taxable income and you are likely to pay taxes for it. With this amount you can pay off other debts on which the interest is not deductible.

Generally an individual is allowed to borrow up to $100,000 from their primary residence along with the first mortgage and then deduct the interest charged before it is repaid. The Internal Revenue Service provides you with more information on this subject through IRS Publication 936 Home Mortgage Deduction.

Wish to receive your feedback.

Regards,
Jessica.

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