Construction loans are not treated differently in Pub 936. However, since draws are usually taken out as needed to pay for materials and construction costs, you have to use the end balances from monthly statements to figure the average balance. Also, converting the construction loan to a permanent loan is a refinancing of the construction loan so it's like one continuous loan from the start of the construction loan to the end of the permanent loan (or end of the tax year). Figure the average balance by summing the end balances from your monthly statements and dividing by the total number of months.
Turbo Tax does not use the statement balance method. It uses the beginning and end balances to figure the average balance. Also, at least in prior years, Turbo Tax did not include the refinanced loan balance to determine if the average balance exceeds the limit of $750K (a software hack to avoid adding the two balances together causing excessive limiting of deductible interest on refinanced mortgages).
If you provide details of your mortgages, it may help explain what is happening with your return.
