[quote=UCGal][quote=SK in CV]Debt incurred within 90 days of acquisistion of a personal residence can be considered qualified home mortgage debt if it meets all the other requirements. There is no “registration”. Borrow the money, and get the security interest recorded within 90 days of the purchase and you’re good to go.[/quote]
SK – I have a question…
Is it only qualified home mortgage debt if you finance within the first 3 months? What about people who are serial refinancers (cough cough FLU cough cough xboxboy cough.)
Lets say someone starts out with a home purchased for 100k, financed for 80k. Appreciation happens and this person refinances w/ cash out – at 300k… rinse and repeat…. They can still deduct the mortgage interest…?
But another person scrapes together 100k in cash – lets say borrowing from their 401k, or family – to make their all-cash offer sweet enough to beat out other buyers. We all hear about how cash offers are king. They get the house – but don’t finance it till 120 days (more than the 90 days)… At that point they take out an 80k loan. Isn’t their mortgage just as deductable?
The first person extracted money from the house – more than the original purchase price. Yet the interest is still deductable. The second person did not extract the money – just paid back the nice folks who lent them money to make a cash offer.
Does the IRS really look at this 90 day thing?[/quote]
Last question first. I have no idea whether the IRS ever looks at it. I’m pretty sure they have no automated mechanism in place to verify it. Lenders are required to file form 1098 for most all secured debt, I don’t think there’s any differentiation between purchase money or other debt.
Beyond that, only purchase money debt qualifies which includes original purchase, debt incurred for substantial improvements, and refinancing that existing debt. Debt that results in cash out doesn’t qualify.
Interest on an additional $100K in debt is also deductible. So if you pay cash, and then finance more than 90 days later, only the interest on the $100K is deductible as home mortgage interest.
