Do you have to pay taxes when refinancing a home after rehabbing?

[Farid Moaveni]

Hello,

Does anyone know if you must pay tax on the “income” earned after refinancing a home you recently rehabbed?

If I invest total cost of 80k in a home, get it refinanced at 120k and get 70% of that to invest in another home, do I need to pay tax on the 4k earned in equity? Or if I only pull the original 80k out to invest in another property, do I need to pay any tax at all?

I don’t think I can 1031 Exchange unless I sell the home, so I’m not sure if that strategy applies to refinancing.

Any help would be greatly appreciated. I’m just trying to learn as I begin my investment journey.

Thanks!

[Farid Moaveni]

@Arvi Carkanji

Thanks for the reply. I guess I was thinking, would it be treated as income since I am making a profit after refinancing? Or if I leave the equity earned in the property and only pull my original amount out, am I still considered to be making an income, if I’m reinvesting that money into another property.