Erin_EA wrote: I would guess the IRS would say no, they may not deduct the HELOC interest, because that debt was NOT incurred to "buy, build, or substantially improve the home" - the debt was incurred to improve the taxpayer's financial position?
A re-finance of acquisition debt remains acquisition debt, up to the amount of the refinanced principal, and for as long as the term of the original loan (i.e. you can't extend the term of acquisition debt by refinancing beyond the original scheduled payoff date). There have been other discussions about what property must secure the re-financed debt and so on, but let's omit those for simplicity.
What's not clear from the OP is what was the acquisition debt balance at time of re-finance, and if it was more than $50K (seems very likely), what other loans were originated as part of the re-finance? I don't think the questions can be answered without that additional information, despite JR1's casual response.