Bees
Level 7

Deductions & credits

More of a question to @Opus 17  then an answer. I believe you are going to have to reconsider/reduce the basis of your property by the house value at  purchase since those assets are no longer part of your home. Then add all the construction costs new home to the value. https://www.irs.gov/pub/irs-pdf/p523.pdf  see pages 8 and 9

Disclaimer: Not a tax professional. Information gathered from internet links. Anything dated in June 2019 was posted in prior years and is before the 2019 limits and changes.