Are land loan interests tax deductible? (heloc, property, IRS, buy)

[evilnewbie]

I kept hearing "depends"... They say, if its for investment purposes then yes, it is tax deductible... its also tax deductible if you use a HELOC or similar mortgage tool to pay for the land... my question is? What determines "investment purposes"? Could I say, its for investment purposes and then six years down the road, decide I rather build a home on it? Is that possible?

[chet everett]

You are asking the wrong kind of question to the wrong people.

Are you buying the land for AN ONGOING BUSINESS? That is NOT the same as a "personal investment". You need to read IRS Pub 550. If you don't understand Chapter 3, then hire a tax accountant that can explain it to you.

http://www.irs.gov/pub/irs-pdf/p550.pdf

[evilnewbie]

As defined by Google, investment property is the purchase of property for either rent or capital gain. For instance if I choose to buy land as an investment (for capital gain) and then say, 5 years later, decide to build on the land. Does that mean the previous 4 years, the mortgage interest is tax deductible? That is how I am thinking... bankrate said something like this...

"...The interest expense on a land loan may be tax deductible if the land is held as an investment..."

That's what I am trying to understand...

[chet everett]

I am fairly certain there are IRS court decisions on this, but I don't want to quote the wrong one -- if you don't get a paid adviser you are getting your money's worth

[HappyTexan]

I bought land and built on it a few years later. The mortgage interest on the land loan WAS NOT deductible.