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I purchased vacant land to build a primary home on. Mortgage interest is deductible once construction starts, for 24 months. Is construction defined anywhere?

Forum|Forum|7 years ago
June 6, 2019
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We immediately started "work" of clearing the land to make it suitable to build on, but didn't pull the building permit and start on the house itself for another 7 months. It'll still be done within the 24 months. Can I count the interest paid before acquiring the building permit?

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Best answer by MichaelDC

Yes. Acquiring a permit is not a requirement to claim the mortgage interest on Schedule A. Clearing the land would qualify as construction cost.

A little more info:

A manufactured home qualifies under this rule: Interest on land can be deductible if you intend to build a house on it. You can claim a mortgage interest deduction if you will be completing and moving into the home within 24 months of when you start claiming the write-off. The deduction covers your loan on your lot as well as your construction loan if any. To be able to claim this write-off, the house under construction must be your first or second house, and your total mortgage debt must be $1.1 million or less.

Please feel free to post any additional details or questions in the comment section.

https://www.nolo.com/legal-encyclopedia/deducting-interest-when-constructing-new-building.html

M

MichaelDCAnswer

Employee

Yes. Acquiring a permit is not a requirement to claim the mortgage interest on Schedule A. Clearing the land would qualify as construction cost.

A little more info:

A manufactured home qualifies under this rule: Interest on land can be deductible if you intend to build a house on it. You can claim a mortgage interest deduction if you will be completing and moving into the home within 24 months of when you start claiming the write-off. The deduction covers your loan on your lot as well as your construction loan if any. To be able to claim this write-off, the house under construction must be your first or second house, and your total mortgage debt must be $1.1 million or less.

Please feel free to post any additional details or questions in the comment section.

https://www.nolo.com/legal-encyclopedia/deducting-interest-when-constructing-new-building.html

M

mattpparkerAuthor

Thanks for the feedback.

This one is standard construction, and it'll be our primary home when it's done.  We only have 1 other place to live at the moment, that we currently call our primary home; it will be gone when the new house is complete.  So, for 2017, it'll count as our 2nd home.

We paid interest on a mortgage for the land only for a while, with the land as collateral.  We paid it off and got a construction loan, with the land and house as collateral.  If I understand correctly, the interest on both mortgages is deductible.