In 2019, we started a home tear down project; will complete in 2020. We moved temporarily. What are the tax implications? Which address should we use? Thank you

[chamsam]

We paid off the existing mortgage. Took out a "construction loan" which has an interest only payment.

[LeonardS]

How you report the project depends on the effect it had on your property.

I would be a capital improvement if it is a permanent structural change or the restoration of some aspect of a property that will either enhance the property's overall value, prolongs its useful life, or adapt it to new uses.  The value of a capital improvement is added to the basis of your property.

If it does not meet the criteria for being a capital improvement, then it would be considered a repair and is not deductible.

The interest on the construction loan is deductible as an itemized deduction if you itemize your deductions.  if you still receive mail at your residence under renovation use that address otherwise use the address where you are currently receiving your mail