Question

Mortgage Refi due to Divorce (with cash out)

Forum|Forum|6 years ago
February 2, 2020
1 reply
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7/31/2017 purchased main home with 15 year mortgage ($424k)

10/25/2019 refinanced (balance from original mortgage was $350k at refi time) due to divorce and had to pull $67,000 out to buy spouse's portion. With fees, and the cash out of $67k, new mortgage $430,500

10/25/2019 2019 lender sold the loan ($430,500) to Chase on the same day I closed.

1098's from 3 lenders in 2019.

Question: where do I represent the $67,000 that was pulled out to pay ex-spouse? If I show it as a regular cash-out refi, seems the interest deduction decreases.

What is the proper way to represent the increase in mortgage from $350k to $430,500?

D

DianeC958

Since the cash out was used to purchase your ex-spouse's portion of the house is still counts as a cost to purchase or improve the home. The interest on the increase is the mortgage is all tax-deductible.

What may be happening since you are putting in more than one 1098 form is in Box 2 of the 1098 form it asks what the loan balance was as of 01/01/2019. On the two of your 1098 forms that box needs to be $0 since the loans originated during the year.

Please go back and check these entries to see is then all of your interest is tax-deductible.

Link on how to enter form 1098 into TurboTax

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