I've done some precursory research on this question below, but didn't find a satisfactory answer, so I wanted to see if anyone does and has a source to help direct my further research.
I did a cashout refinance to reduce my mortgage interest rate, pay off some loans that I could not deduct the interest for anyway, and some additional cash to invest. According to the IRS instructions, I feel pretty confident in my understanding that this new mortgage is comprised of (1) home acquisiton debt [equal to the amount of remaining original purchase mortgage + eligible improvements], (2) home equity debt, and (3) personal debt. We fall very squarely into the AMT, so interest paid on (1) is deductible, and interest on (2) and (3) is not. So far so good (although since I refinanced this year, I've got to also weight the interest paid on the original mortgage versus the paid on the refinance, adding additional calculations).
My question: Home acquisition debt is debt used to "buy, build or improve your home" on an eligible home, which mine is. I did use a portion of cashout money to replace and stain my fence within a few months of the refinance, so I am adding that amount to the last balance of the original purchase mortgage to get my new "Home acquisition debt" total. However, we are seriously considering a roof replacement this year, and maybe solar panels. I've read IRS examples about improvements made before the refinance counting if within some period, I think 24 months, but I can't find guidance about whether subsequent improvements would also qualify. The reality is that I used most of the home equity and personal loan balances from the cashout refi to retire other debt and invest, but I would like to know for certain whether eligible improvements can be done year or two after the actual refinance and still increase the "home acquisition" portion of my mortgage on subsequent tax returns?
