DEAR MR. MYERS: We borrowed some money to build a house last November. Construction began last month, but won’t be finished until June or July. Are the interest payments on the construction loan tax-deductible?
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.
REAL ESTATE TRIVIA: Winslow, Arizona, is memorialized in my favorite song of all time, “Take it Easy” by The Eagles. Co-writer and singer Glenn Frey died on Jan. 18. Winslow is a great town. But now, with Interstate 40 making the famous Route 66 less convenient, roughly 25 percent of its residents live below the poverty line because there are fewer businesses to employ them.
DEAR MR. MYERS: What are “Levittowns”?
ANSWER: They are great communities in three states — New York, New Jersey and Pennsylvania — and a fourth in Puerto Rico.
Levittowns were the brainchild of William Levitt, who served in the Navy during World War II and developed expertise in the mass-production of military housing that used uniform and interchangeable parts. He wisely figured that returning vets would marry and start having kids after the war ended, so he and his colleagues at Levitt & Sons Inc. started buying large parcels of land on the outskirts of major cities to build high-quality but affordable single-family homes.
The first project, built on what were previously sprawling potato and onion fields in New York’s Long Island area, was started in 1947. It had 300 houses, many of which were purchased with low-down-payment mortgages backed by the Veterans Administration or the Federal Housing Administration.
The concept of mass-producing such large tracts in areas near major cities caught on with other builders across the nation, earning William Levitt the nickname of “the father of modern suburbia.”
David W. Myers’ column is distributed by Cowles Syndicate Inc.