You should be able to deduct, as an itemized deduction, the interest on this loan as "mortgage interest" if you meet the IRS guidelines:
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Home under construction.
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
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Tom Young
