Does anyone know if construction loan interest is tax deductible like regular mortgage interest? TIA [img]/forums/images/icons/smile.gif[/img]
Does anyone know if construction loan interest is tax deductible like regular mortgage interest? TIA [img]/forums/images/icons/smile.gif[/img]
Rob
Yes
From the IRS FAQ pages:
Is the interest paid on the loan for a lot (with no home on it) deductible as mortgage interest?
Generally the interest on a lot is not deductible as mortgage interest.
If you are planning to build a house, you can start deducting mortgage interest once construction begins. The following is from Publication 936, Home Mortgage Interest Deduction:
You can treat a home under construction as a qualified home for a period of up to 24 months, but only if it becomes your qualified home at the time it is ready for occupancy. The 24-month period can start any time on or after the day construction begins.
References:
Publication 936, Home Mortgage Interest Deduction
Tax Topic 505, Interest expenses
Eagle Ridge
Most excellent Bill, thanks! I hadn't done any research and fully expected the answer to be NO but this is great news!
Thanks, thanks, thanks [img]/forums/images/icons/smile.gif[/img]
Rob
Yes, but only if you pay it. If the interim interest gets rolled into the permanent loan it will be deductible ratably over the term of the loan. The best way to secure you deduction is to write checks for the interest.
Alan L. - Texas
North of Mustang
South of Bugtussle
On the Banks of Buck Creek
I totally agree with Alan. I found this out the hard way. The last house I built we got a bridge loan to build the new house. When it was all done I just rolled over the interest into the new loan while the old house sold after we moved into the new one. At the end of the year I fully expected to be able to take that interest off and was not able to.
Hmm, good thoughts. We've been paying the interest all along but had planned on rolling the last payment. I think I can rearrange the funds at closing to cover that payment. Thanks to all for the advice [img]/forums/images/icons/smile.gif[/img]
Rob