Re­quire­ments for tax-de­ductible loans

The Palm Beach Post - Residences - - Front Page - David W. My­ers

Ques­tion: We bor­rowed some money to build a house last Novem­ber. Are the in­ter­est pay­ments on the con­struc­tion loan taxd­e­ductible?

An­swer: Yes, as long as you meet a few ba­sic In­ter­nal Rev­enue Re­quire­ments.

First, the loan must be se­cured by the prop­erty it­self. If it’s an un­se­cured (per­sonal) loan, the in­ter­est is not tax-de­ductible. Gen­er­ally, the IRS also re­quires that the home be com­pleted within 24 months and that it be­comes ei­ther your per­sonal res­i­dence or your se­cond home as soon as it is ready for oc­cu­pancy.

There are some de­tails and the usual IRS minu­tiae in­volved, so it’s im­por­tant to con­sult an ac­coun­tant or other tax pro­fes­sional be­fore you file your up­com­ing tax-re­turn.

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