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GDJR
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Can we deduct the interest on our "to be" primary home construction loan if we pay it all at the end of construction? Lender is offering to capitalize it into the loan.

Construction will span 2 tax years and we'd like to deduct the interest in each respective year. If we opt to capitalize it into the builder's contract and permanent mortgage, we're not sure how deduction would work. All deducted in the year of permanent closing?
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Can we deduct the interest on our "to be" primary home construction loan if we pay it all at the end of construction? Lender is offering to capitalize it into the loan.

So long as the home becomes your main home or second home on the day it's ready for occupancy, you can deduct all the interest you paid on the construction loan within 24 months before the home was completed.

Can we deduct the interest on our "to be" primary home construction loan if we pay it all at the end of construction? Lender is offering to capitalize it into the loan.

When you are trying to decide on this, remember that itemized deductions have no effect at all on your refund or tax due amount unless you have enough itemized deductions to exceed your standard deduction.   Unless you have enough other itemized deductions, the loan interest will have no effect, and you will just get your standard deduction.

 

 

Your itemized deductions have to be more than your standard deduction before you will see a change in your tax owed or tax refund.  The deductions you enter do not necessarily count “dollar for dollar;” many of them are subject to meeting  tough thresholds—medical expenses, for example, must meet a threshold that is pretty hard to reach. (Only the amount that is MORE than 7.5% of your AGI counts)   The software program uses all the IRS rules that apply to the expenses you enter, and it tells you if you have enough to use your itemized deductions or if using the standard deduction is more advantageous for you.  Under the new tax laws, some deductions have been capped—there is a $10,000 limit to the itemized deductions for state, local, property and sales taxes.

 

Your standard deduction lowers your taxable income. The standard deduction makes some of your income “tax free.”  It is not a refund.  You will see your standard or itemized deduction amount on line 12 of your 2023 Form 1040.

 

 

 

 

2023 STANDARD DEDUCTION AMOUNTS

 

SINGLE $13,850  (65 or older/legally blind + $1850)

 

MARRIED FILING SEPARATELY $13,850  (65 or older/legally blind + $1500)

 

MARRIED FILING JOINTLY $27,700  (65+/legally blind) )  + $1500 per spouse

 

HEAD OF HOUSEHOLD  $20,800 (65 or older/blind)  + $1850)

 

 

 

**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**
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