How much cash should an investor pull out on a refinance? Is that money taxable?

[Justin Hennig]

Rates are really low right now...I'm considering refinancing out of a construction loan and pulling my initial investment out on a duplex we rehabbed.

The property will likely appraise high enough we could actually pull more money out than was initially put in.

At around 4% interest on a 30 year conventional refi, what would you do?:

1) Pull out the initial investment to capture infinite returns, but being conservative so to keep debt to income ratios lower for better ability to qualify for future conventional financing.

2) Pull out MORE than the initial investment for even better than infinite returns since that additional money could be reinvested at higher interest rates than it was borrowed at?

3) Your other suggestion

I don't believe it is, but as a side note, is money from a cash-out refinance taxable? 

Thanks BP community!