A cash-out refinance may impact your mortgage interest deduction, which allows you to deduct the loan interest you paid over the year from your taxable income. Unless you use your cashed-out equity to cover a home improvement project on the primary or second home that secures the refinanced loan, you won’t be able to deduct the interest you pay on that portion of your loan. You may still deduct the interest paid on the remaining portion of your loan, though.