Home Mortgage Interest
I have a client who refinanced his home mortgage in 2021 and took some additional cash to do some renovations on his home. The balance before the refinance was approximately $733,000 and the balance after was approximately $833,000. In addition, he converted a portion of his property into a separate living space and rents it out. This is approximately 20% of the total living space.
With the refinance, he now exceeds the $750,000 limit on deducible mortgage debt. So my questions are:
1. Is a refinance that takes you above $750,000 in mortgage debt subject to the $750,000 limit?
2. Since 20% of the home is treated as a rental, can 20% of the $833,000 be allocated to the rental leaving the other 80% as personal residence debt (which would put him below the $750,000 limit?
Thank you.
