Interest on the construction loan as "mortgage interest" may be deductible if: 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 anytime on or after the day construction begins
Most new home construction expenses (abstract fees, utility service charges, legal/recording fees, surveys, and transfer taxes)are not tax deductible but instead are added to your cost basis. Keep track of the expenses as they determine how much capital gains you have when you sell the home.