Expert: Bobbi Buehl - 11/19/2007

Question
My friend Jimmy just refinanced his home and requested $20,000 cash out to pay off debts, purchase a vehicle, etc.  He was told by his bank that he would have to pay taxes on the $20,000 at the end of the year because it's considered taxable income.  I don't understand why he would owe taxes on the money (if it is true) because that money is added onto his total home loan amount, of which, he will already be paying taxes on.  Then he heard that there is a loop hole around getting the money taxed.  "If you can set up more than one savings account & deposit less than $10,000 into it, the IRS won't look at taxing it."  Can you please enlighten/explain if any of this is true?  Thank you for your time.

Answer
I don't know what bank he is talking to, but if he refinances and takes money out, he will not be subject to pay taxes on it! If he hasn't refinanced as of yet, have him contact a broker, or myself to get advise. He is sure to get a better deal than through a local bank in most cases.