We purchased a 0.5 acre lot in late 2022 and just started construction of our home on that lot in late 2023 (so approx. 1 year gap between buying the lot and starting our home build).
For the lot, I got a mortgage for the land purchase, and I paid off the mortgage for the lot within about 9 months, mid-2023. I received a Form 1098-B from the bank which says I paid about $5700 in mortgage interest on that land loan.
We got a construction loan for the house build in late 2023, and that is unrelated to the paid-off mortgage for the land. Construction started on the house in Oct 2023.
My question is this: am I able to deduct the $5700 in mortgage interest paid for the land on my 2023 taxes? We did start construction in 2023, however, the land loan was paid off several months prior to starting construction, so I am not sure if that interest can still be deducted.
I did some searching and this is what the IRS website says:
"No, you can't deduct interest on land that you keep and intend to build a home on. However, some interest may be deductible once construction begins. 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's ready for occupancy. The 24-month period can start any time on or after the day construction begins. As a qualified home, the interest paid may qualify as deductible mortgage interest, with certain limitations."
