The TCJA didn't change the rules on deducting HELOC interest, it only lowered the total debt threshold from $! million to $750,000. The other rules (must be to buy, build, or substantially remodel the home) were in place before 2018, as best I remember.
I think you need to talk to a tax professional. There are some interesting points and I don't know how they work together.
1. The IRS says that for divided use of a home, you can only deduct part of the mortgage for the part of the property that is used for "residential living."
2. A home does not have to be a house, it can be anything with sleeping, cooking and toilet facilities.
3. The loan must be secured by the home. For a houseboat or camper, the loan would be a title loan secured by the boat or camper. But for a house, mortgages are not secured by the house itself, they are secured by the real property (land) on which the house is built.
So there is a question, I think, about whether or not improvements to the land count as improvements to the home. The divided use rule would mean that if you were building an outbuilding to use for work, and not for "residential living", it would not qualify. What about a mother-in-law apartment? It's not part of your home if you plan to rent it to strangers, but what if you allow an elderly parent to live there for free as part of your family? How about a detached garage for your personal car? I have a hard time picturing that a garage would qualify if it was attached to the house by a breezeway but would not qualify if it was detached.
So my first question would be, what is the detached building actually to be used for?
My second question would be, is the building a "substantial improvement?" The publications do not define "substantial" but elsewhere I have seen a suggestion of 10% or more of the home's value. Is building a garden shed for $3000 on a $300,000 house really a substantial improvement? What about a $20,000 garage or a $50,000 studio apartment for an elderly parent?
Bottom line, I don't know, so I suggest you ask your own professional, who will represent you if audited.
Regarding timing, and assuming the interest qualifies for other reasons,
a. the loan qualifies if you take out the loan before the start of construction, as long as you complete construction within 2 years
b. the loan qualifies if you take out the loan after construction is finished, as long as you take out the loan within 90 days, and you can only look back 24 months.
c. for loans taken out during construction, you can count amounts spent after the loan was taken out, plus amounts spent up to 24 months before the date of the loan.
