A bill to amend the Internal Revenue Code of 1986 to permit indebtedness resulting from the refinancing of certain indebtedness incurred before August 16, 1986, to qualify for the grandfather provisions of the interest disallowance rules.

Amends the Internal Revenue Code to allow a tax deduction for interest on refinanced indebtedness secured by a qualified residence, when the indebtedness was incurred and secured on or before August 16, 1986, but such refinancing occurred after August 16, 1986. Requires that the principal amount after refinancing not exceed the principal amount before refinancing (even though the latter, when originally incurred, exceeded the cost basis for the residence plus improvements).