Paid of land loan and now have construction loan

Forum|Forum|5 years ago
March 13, 2021
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Hello,

Last year, we paid off our land loan and we started our construction loan. I entered the data in TurboTax to match the tax documents I received from the bank, but TT won't let me continue until I add in 'Borrowed in 2020' but if I put in a number there - it won't match the tax forms. The tax forms from the bank show a balance as of January 2020, but we didn't get the construction loan until June. There was only one draw taken in 2020. Do I put that or the whole amount, even though I haven't technically borrowed (drawn) that full amount? And why does it matter anyway?!?! It's to complete a worksheet - how much I borrowed last year doesn't affect my taxes. Please advise.

ToddL99

Enter the amount you had drawn down (from the construction loan) by the end of 2020 - that is all you technically owed at year end.

The bank may be showing the maximum amount you are qualified to borrow under the terms of the construction loan, but your actual mortgage balance is only what you have draw down. The only reason this number matters is because there is a limit on mortgage loan balances in order to deduct mortgage interest.

From Publication 936 (2020), Home Mortgage Interest Deduction:

Home mortgage interest. You can deduct home mortgage interest on the first $750,000 ($375,000 if married filing separately) of indebtedness. However, higher limitations ($1 million ($500,000 if married filing separately)) apply if you are deducting mortgage interest from indebtedness incurred before December 16, 2017.