I have looked at dozens of sites describing the US tax rules for a deducting cash-out refinance interest and I find they are all slightly ambiguous in their wording. All of those sites point out that only interest on the first 100K of the cash-out can be claimed as a mortgage interest deduction, but it is unclear if that amount excludes, includes or is in addition to the original principal amount that was paid off.
Say I have a current mortgage with 50K unpaid principal. I want to do a cash-out refinance to cover the original mortgage plus 200K, for a total new mortgage of 250K (assume the home value is high enough that LTV ratio is acceptable to the lender).
Is the interest I can claim as a deduction on just 100K total, or is it on 50K (original mortgage) + 100K (of the cash out) = 150K?
Subtly different question -- what if the extra cash-out is 50K, for a total new mortgage of 100K? I assume the interest deduction would be 100K and not 50K, but do correct me if I am wrong there.