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February issue of Kiplingers (page 77) talks about relief for refinancers.

I know that the points I paid for refinancing would have to be written off over the life of my loan however the paragraph says something else interesting:

"...if you engaged in a "cash-out" refinancing for more than the balance of your previous mortgage-and used some of the extra money for home improvements-you can deduct a proportationate share of the points on your 2001 tax return."

Since all of the cash-out money was used for home improvements I'd like to know how this is to be calculated. I looked through the pubs on IRS.GOV site and the closest thing I found was Pub 936 (Home Mortgage Interest Deduction). It didn't give me the info I was looking for.

Does anyone know how this would be calculated or what form and pub would have this guidance?

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