turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
Announcements
Close icon
Do you have a TurboTax Online account?

We'll help you get started or pick up where you left off.

bneedham5
New Member

We purchased vacant land to build a house within 2 years. Can I deduct the interest and closing cost for this land?

We own a home now will build a new primary home on the vacant land and move in once completed.

x
Do you have an Intuit account?

Do you have an Intuit account?

You'll need to sign in or create an account to connect with an expert.

1 Reply

We purchased vacant land to build a house within 2 years. Can I deduct the interest and closing cost for this land?

Interest expense on vacant land is limited to 24 months prior to getting a regular home mortgage.  The Property Tax on the land is deductible regardless, the remaining closing cost are not deductible but a cost of the property and should be kept track of for when the home is sold or rented at a later date. 

The IRS FAQ and the IRS Publication 936, are using some of the same language however differing answers.  

This is from the IRS Publication 2017, page 9 third column, https://www.irs.gov/pub/irs-pdf/p936.pdf

 You build or improve your home and take out the mortgage before the work is completed. The home acquisition debt is limited to the amount of the expenses incurred within 24 months before the date of the mortgage. 

Internal Revenue Code 163.

"Section 163(h)(3)(B)(i) provides that acquisition indebtedness is any indebtedness that is incurred in acquiring, constructing, or substantially improving a qualified residence and is secured by the residence. However, § 163(h)(3)(B)(ii) limits the amount of indebtedness treated as acquisition indebtedness to $1,000,000 ($500,000 for a married individual filing separately). Accordingly, any indebtedness described in § 163(h)(3)(B)(i) in excess of $1,000,000 is, by definition, not acquisition indebtedness for purposes of § 163(h)(3). "

message box icon

Get more help

Ask questions and learn more about your taxes and finances.

Post your Question