Do You Pay Tax on a Cash Out from a Refi?

You pay tax on the cash out on a refi.

FALSE!

I recently was reminded by a client that there is a common misconception out there that the cash out you get when you refinance is taxable.

This is not true. The tax on any property’s gain (capital gain or the amount above the homeowners’ exemption) happens when you sell. So, if you or your client need debt relief, or took cash out in a HELOC, and now want to pay that HELOC off, feel free. You “pay the piper” later, if ever…