When is the Interest Deductible on a Home Improvement Loan?

Posted by Abel Leon on

When an individual takes a loan on his house or refinances for the purposes of a substantial improvement, when does the interest on that loan become deductible acquisition debt? The answer to that question comes from IRS Pub 936 (Pg. 9)…

1. If 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.

2. If you build or improve your home and take out the mortgage within 90 days after the work is completed. The home acquisition debt is limited to the amount of the expenses incurred within the period beginning 24 months before the work is completed and ending on the date of the mortgage. 

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