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Cash used for new work on the original house from the refinancing would be home acquisition debt(interest on first million deductible). However, cash taken from that refinancing secured by that house used to purchase another house would not be home acquisition debt. Home acquisition debt must be secured by a mortgage on that housing unit. It would be a home equity loan(only $100,000 deductible for ordinary tax, none on AMT). So I think you might reconsider that refinancing.

Replacing the roof on the original house is a repair. So, holding off until the house is in service as a rental would get you some tax benefit.

For reference look up the Oberman case (47 TC 471).

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