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Author: WWells One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121185  
Subject: When Building a Home . . . Date: 3/31/1999 3:52 PM
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1) We paid cash for a lot.
2) Used the lot plus some more cash to secure financing for building a house.
3) Architect drew plans, lawyers handled closings, contrator did most of the contracting but we did about 25% of the contracting ourselves.
4) The construction loan required monthly "interest-only" payments until the house was complete. It then converted to a 30-year fixed mortgage.

Here are the questions (sorry it took so long).

1) Are any of the professional's fees deductable - specifically the lawyer or contractor? How about building permits and stuff needed to get them like surveys and site plans?
2) Is the interest paid on the "interest-only" construction loan deductable? How about points? Appraisals? Mortgage insurance? Stamps on legal docs?
3) How about sales tax on items we bought for the house (we bought paint, blinds, vinly and hardwood flooring, appliances, etc). How about sales tax the contractor and others bought (doors, windows)?
4) Aside from the interest (since converting to a 30 year fixed) and all the property taxes, is there anything else possible? Something - anything?

Please and Thank you.
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Author: Bob78164 Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13345 of 121185
Subject: Re: When Building a Home . . . Date: 3/31/1999 4:08 PM
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WWells asks questions based on the following facts:

1) We paid cash for a lot.
2) Used the lot plus some more cash to secure financing for building a house.
3) Architect drew plans, lawyers handled closings, contrator did most of the contracting but we did about 25% of the contracting ourselves.
4) The construction loan required monthly "interest-only" payments until the house was complete. It then converted to a 30-year fixed mortgage.


I reply:

This is outside my knowledge base, but I'm guessing it matters, a lot, whether the house was intended as an investment or as your primary residence. Unfortunately, your post doesn't say which. --Bob

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Author: WWells One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13388 of 121185
Subject: Re: When Building a Home . . . Date: 4/1/1999 7:11 AM
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1) We paid cash for a lot.
2) Used the lot plus some more cash to secure financing for building a house.
3) Architect drew plans, lawyers handled closings, contrator did most of the contracting but we did about 25% of the contracting ourselves.
4) The construction loan required monthly "interest-only" payments until the house was complete. It then converted to a 30-year fixed mortgage.

*5) And to clarify (Bob asked) it is for personal use.

Here are the questions (sorry it took so long).

1) Are any of the professional's fees deductable - specifically the lawyer or contractor? How about building permits and stuff needed to get them like surveys and site plans?
2) Is the interest paid on the "interest-only" construction loan deductable? How about points? Appraisals? Mortgage insurance? Stamps on legal docs?
3) How about sales tax on items we bought for the house (we bought paint, blinds, vinly and hardwood flooring, appliances, etc). How about sales tax the contractor and others bought (doors, windows)?
4) Aside from the interest (since converting to a 30 year fixed) and all the property taxes, is there anything else possible? Something - anything?

Please and Thank you.

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Author: rjm1 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13407 of 121185
Subject: Re: When Building a Home . . . Date: 4/1/1999 7:21 PM
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1) We paid cash for a lot.
2) Used the lot plus some more cash to secure financing for building a house.
3) Architect drew plans, lawyers handled closings, contrator did most of the contracting but we did
about 25% of the contracting ourselves.
4) The construction loan required monthly "interest-only" payments until the house was complete. It
then converted to a 30-year fixed mortgage.

*5) And to clarify (Bob asked) it is for personal use.

Here are the questions (sorry it took so long).

1) Are any of the professional's fees deductable - specifically the lawyer or contractor? How about
building permits and stuff needed to get them like surveys and site plans?
2) Is the interest paid on the "interest-only" construction loan deductable? How about points?
Appraisals? Mortgage insurance? Stamps on legal docs?
3) How about sales tax on items we bought for the house (we bought paint, blinds, vinly and
hardwood flooring, appliances, etc). How about sales tax the contractor and others bought (doors,
windows)?
4) Aside from the interest (since converting to a 30 year fixed) and all the property taxes, is there
anything else possible? Something - anything?


I am not sure about your construction interest and points. Everything else is added to the cost basis of the house. If the construction interest and points is not deductabel it will also be added to the basis.

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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13610 of 121185
Subject: Re: When Building a Home . . . Date: 4/3/1999 11:46 PM
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[[ 1) We paid cash for a lot.
2) Used the lot plus some more cash to secure financing for building a house.
3) Architect drew plans, lawyers handled closings, contrator did most of the
contracting but we did about 25% of the contracting ourselves.
4) The construction loan required monthly "interest-only" payments until the
house was complete. It then converted to a 30-year fixed mortgage.]]

You told me a lot...but NOT what I really needed to know: Is this your principal residence that you are building? Or is it a rental unit? Or a second home? The answers may be different depending upon how you answer THIS question. I'll assume that it's your primary residence for the purposes of my response.

[[ Here are the questions (sorry it took so long).
1) Are any of the professional's fees deductable - specifically the lawyer or
contractor? How about building permits and stuff needed to get them like
surveys and site plans?]]

Nope...they are all additions to the cost of the property. Not currently deductible.

[[ 2) Is the interest paid on the "interest-only" construction loan deductable?]]

Generally yes...

[[ How
about points? ]]

Also, generally yes. But there are specific rules on how long you can deduct your construction loan interst. If you are within the 24 month period since you began construction, you should be fine. If not, let me know and I'll tell you where to do the additional research.

[[Appraisals? Mortgage insurance? Stamps on legal docs?]]

Nope...additions to basis...no currently deductible.

[[ 3) How about sales tax on items we bought for the house (we bought paint,
blinds, vinly and hardwood flooring, appliances, etc). How about sales tax the
contractor and others bought (doors, windows)?]]

Nope...no sales taxes. No how. No way.

[[ 4) Aside from the interest (since converting to a 30 year fixed) and all the
property taxes, is there anything else possible? Something - anything? ]]

Generally not...all of the other expenses go to the cost basis of the property.

TMF Taxes
Roy

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