Simple example: If a client refinances a $500,000 mortgage (all acquisition debt) with a $510,000 mortgage, with the additional $10,000 only covering the refinancing fees, do we prorate the new mortgage interest and say we can only deduct 500/510, or 98% of it (assuming no fees are points)? Or do we consider the new mortgage interest 100% deductible.

Similar but one step more complex example: And thus, if a client refinances a $500,000 mortgage (all acquisition debt) with a $550,000 mortgage, with $10,000 in fees, $20,000 in enhancements (acquisition debt), and $20,000 in other uses, do we prorate the new mortgage's interest and deduct only 520/550, or 95% of it (assuming no fees are points)? Or do we consider the new mortgage 530/550, or 96%, deductible?