At the start of 2024, I was in the middle of building a new home using a construction loan. The home was completed in the middle of 2024 and the construction loan was converted by the bank into a regular mortgage (for approximately $765k). No new documents were signed. The loan was designed to automatically convert when construction was completed.
When I received my year end mortgage statement from the bank, it indicates the year end principle balance for the mortgage was only half of the actual principle balance at the end of the year. This appears to be limiting the amount of mortgage interest I can deduct for the year.
Looking at the IRS guidelines for allowable mortgage interest deductions (publication 936), it provides several methods for computing the average. It also states "You can use the highest mortgage balances during the year, but you may benefit most by using the average balances."
Am I allowed to use any of the methods to compute the average loan value and use the best possible method to replace the value provided on the year end mortgage statement from my bank? As it says, can I use the highest mortgage balance if that provides me the best deduction? Are there any special considerations given that my mortgage was a construction loan for part of the year?
Sorry for all the questions, but will appreciate any guidance that can be offered!
Thanks,
Matt
