Cash Out Refi and Taxes

[Salvador Santolucito]

We've got a rental property that is almost paid off.  We are considering adding a pool to our main house and are looking at financing options.

I was considering a cash-out refi of our rental property.  It seems like the rate would be lower than a personal loan.  I'd have to do all the math on the closing costs and fees to see how it compares...

My question is this: If I do a refinance for my rental property and pull cash out for the purposes of improving a non-rental property home, can I still deduct the closing costs and interest from the new mortgage?  Does the government care why I refinanced?