Interest deduction on construction loan

[ddamitio]

I lived in one house, while building another. I then sold the old house and moved into the new one in October. Can I deduct the interest on the construction loan while my new house was being built?

[IsabellaG · Accepted solution]

Yes you can deduct the interest on your construction loan if the loan was secured by the property you moved into. 

You can treat a home under construction as a qualified home for a period of up to 24 months, but only if it becomes your qualified home at the time it is ready for occupancy. The 24-month period can start any time on or after the date that construction begins.

See page 4 under Qualified Home and Home Under Construction: https://www.irs.gov/pub/irs-pdf/p936.pdf

[ckellerman01]

We paid interest on a construction loan last year and I was curious where I report that on my taxes? The bank sent me a statement showing how much interest we paid but it is not a 1098, so I don't really know where I document it on my turbo tax forms. Thanks for your help

[RobertG]

You don't need Form 1098 to report mortgage interest.

As long as you have the information you need, you can enter the mortgage interest into TurboTax.

You can get your mortgage info by going to your lender’s website. Other documents, like your monthly mortgage bills and your Closing Disclosure (or HUD-1), will also have some of this info.

Aside from the amount of interest you will need to know the: 

• Outstanding mortgage principal as of 1/1/2019
• Mortgage origination date
• Mortgage acquisition date

@ckellerman01

[JTong]

Where within TurboTax would you enter this construction loan interest?  My financial institution sent me a 1098 but left out the mortgage principal amount.  Would I enter the total loan amount (even if such total amount has not been disbursed by the end of 2019) or just the amount disbursed in 2019?

[KarenM90]

Yes, the construction interest should be calculated on the amount dispersed.  So the mortgage principal amount, as of the date requested, is the amount you would use for the mortgage principal amount.

[TitanatorCPA]

What about the loan origination fees paid on a construction loan in the same situation.  Can I deduct any or all of those fees in the year they were paid?

[VictoriaD75]

Loan origination fees are deductible as points paid in many cases. See the link below:

Which loan origination fees are tax deductible?

IRS Home Mortgage Points

[mmkyle]

The lender is telling me to use the Closing Disclosure form and file taxes on the Home Construction Loan I closed on in 07/2021.  I only paid closing cost thus far.  I have not closed on the house and moved in yet.  What information is needed by Turbo?  Please help

[ThomasM125]

You said you only paid closing costs, so I assume you haven't made any loan payments yet. If so, then you don't have any mortgage interest to enter on your tax return. You may be able to deduct property taxes, but you can't deduct those if they are prepaid, so I don't think you would be able to do that either. 

I guess you could have paid points, which is a loan fee based on the loan amount. If so, you treat that as mortgage interest and enter it in TurboTax as such. That would be entered in the Your Home section of TurboTax, and then the Mortgage Interest, Refinancing, and Insurance section, in the Federal area of TurboTax under Deductions and Credits.