Rookie Reply: Is a Cash-Out Refinance Taxable?
Real estate investing provides a lot of tax benefits, some that new investors or everyday homeowners simply don’t know about. One of the greatest tax benefits? No taxes on loans and liabilities! That means that the cash-out refinance can be done without paying any taxes on the cash given to you from the bank. But, there are a couple of ways that you could get snagged during tax season if you don’t follow the right steps.
Here are some suggestions:
Cash-out refinances are considered debt, not income, from a taxation point of view
If you are planning to have your business pay you back for acquisition/renovation costs, be sure you make a record of that so you don’t get taxed on your repayment
You may pay taxes on a cash-out refinance if you plan on taking profits from your business
As always, consult a tax professional if you have any specific tax questions
And more in the episode…
If you want Ashley and Tony to answer a real estate question, you can post in the Real Estate Rookie Facebook Group! Or, call us at the Rookie Request Line (1-888-5-ROOKIE).
Links from the Show
Check the full show notes here: https://www.biggerpockets.com/blog/rookie-202
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