Taxes on cash out during refi?


D

Dan Kennedy

If I decide to refi my house, do I pay taxes on the cash I
take this year? If not, I know the IRS is going to take
their money at some point, so is it all taken at the time of
sale? Not sure if it makes a difference, but this is my
primary residence and I am refi'ing in order to buy another
property.

Thanks,
Dan
 
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S

Stuart Bronstein

Dan said:
If I decide to refi my house, do I pay taxes on the cash I
take this year?
A loan is not income, so there is no tax when received.
If not, I know the IRS is going to take their money at some
point, so is it all taken at the time of sale?
That's it.
Not sure if it makes a difference, but this is my primary
residence and I am refi'ing in order to buy another property.
Shouldn't make any difference.

Stu
 
P

Paul

Dan Kennedy said:
If I decide to refi my house, do I pay taxes on the cash I
take this year?
Nope.

If not, I know the IRS is going to take
their money at some point, so is it all
taken at the time of sale?
That would be when any gain is computed.
 
D

David Woods, EA, ChFC, CLU

Dan Kennedy said:
If I decide to refi my house, do I pay taxes on the cash I
take this year? If not, I know the IRS is going to take
their money at some point, so is it all taken at the time of
sale? Not sure if it makes a difference, but this is my
primary residence and I am refi'ing in order to buy another
property.
Refinancing a mortgage is not income.
 
J

John H. Fisher

If I decide to refi my house, do I pay taxes on the cash I
take this year? If not, I know the IRS is going to take
their money at some point, so is it all taken at the time of
sale? Not sure if it makes a difference, but this is my
primary residence and I am refi'ing in order to buy another
property.
Refinancing doesn't subject you to a tax. In fact it may
serve to reduce your taxes, depending on your deductible
interest expense.

"Jack" - John H. Fisher - (e-mail address removed)
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=:)
 
R

Rich Carreiro

If I decide to refi my house, do I pay taxes on the cash I
take this year?
No.

If not, I know the IRS is going to take their money at some point,
No, they're not. Or at least the loan isn't going to change
the amount of money they take on the ultimate sale. Aside
from the potential deductibility of interest on the loan, a
loan is a tax nullity -- the size of your mortgage, or
whether or not it's a cash-out re-fi doesn't change your tax
situation at all.
 
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P

Phil Marti

If I decide to refi my house, do I pay taxes on the cash I
take this year? If not, I know the IRS is going to take
their money at some point, so is it all taken at the time of
sale? Not sure if it makes a difference, but this is my
primary residence and I am refi'ing in order to buy another
property.
Financing, original or refi, has ZERO effect on the ultimate
gain or loss on sale of the property.

Phil Marti
Clarksburg, MD
 
G

Gary Goodman

(e-mail address removed) says...
If I decide to refi my house, do I pay taxes on the cash I
take this year? If not, I know the IRS is going to take
their money at some point, so is it all taken at the time of
sale? Not sure if it makes a difference, but this is my
primary residence and I am refi'ing in order to buy another
property.
Refinancing a house is not a taxable event on the income
side. You didn't provide enough information to determine if
the interest will be deductible. It sounds like you are
going to buy investment property. If that is the case, you
should seek tax advice before you do anything.

Gary
 
H

Herb Smith

If I decide to refi my house, do I pay taxes on the cash I
take this year? If not, I know the IRS is going to take
their money at some point, so is it all taken at the time of
sale? Not sure if it makes a difference, but this is my
primary residence and I am refi'ing in order to buy another
property.
You are only borrowing money (which I assume you will repay)
and not receiving income. There is no tax on non-income or
borrowed funds. A mortgage or refinance has nothing to do
with any gain calculation on sale of the real property.
 
R

rick++

No direct tax on the loan proceeds. However, there are some
restrictions on the deductability of interest and points.
This is effectively a "tax".
 
L

Linda Dorfmont

It's not income if you have to pay it back. It's the bank's
money. You only pay taxes on your own income.

Linda Dorfmont E.A,CFP,CSA
 
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T

Tom Healy

If I decide to refi my house, do I pay taxes on the cash I
take this year? If not, I know the IRS is going to take
their money at some point, so is it all taken at the time of
sale? Not sure if it makes a difference, but this is my
primary residence and I am refi'ing in order to buy another
property.
No current tax on the cash. If the total "equity debt" on
the house (the amount above the original mortgaage plus any
improvements to the house is over $100,000, you can't deduct
the interest on the additional borrowing unless it meets
other tests for deductibility. for example, using the
proceeds to buy an investment property would allow that
portion of the interest to be deducted as interest elsewhere
on the return (Schedule E for a rental property, C for a
business, F for a farm, or Form 4952 for other types of
investments).

But if your home has more than $500,000 of gain, and you
have mortgaged it to the hilt, you may have trouble finding
the cash to pay the tax when you sell it.

--
Thomas E Healy, CPA, PC
1650 38th St., Ste 202W
Boulder, CO 80301
Please send email to: (e-mail address removed), since I block all email at my
newsgroup address.
phone (303) 443-1804
fax (720) 489-3772
 

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