Most communities contain residential land tracts of varying sizes. Some homeowners prefer larger lots and the lifestyle options inherent in having additional outside space. Individuals seeking to buy or build a home on a larger lot can optimize their search efforts by focusing initially on the tract size of each property listed for sale.
Many residential tracts are less than an acre in size, so a lot consisting of a few acres can often provide its occupants with a semblance of country living. In addition to space for storage buildings, a larger parcel may provide room for fruit trees or vegetable gardening. Generally speaking, the average size of real estate tracts becomes larger as you travel farther from the central business district of a city.
Land Acquisition Options
The price per acre of raw land is usually less in outlying areas. If you are interested in securing a house on several acres of land, suitable properties are probably already listed for sale in your area. On the other hand, your realtor may have a listing for some vacant land on which you would like to build. Either way, you probably have wondered about how extra acreage affects the mortgage interest tax deduction.
Mortgage Deduction for Land
The tax deduction for home mortgage interest is not directly based on lot size. The deduction is based on the amount of mortgage debt incurred. The tax code allows certain houseboats to qualify as homes, so real estate is not always required as collateral for a mortgage. As long as the house lies on the same tract as the surrounding acreage, you may deduct interest on up to $1 million in mortgage debt.
Construction Loan Advances
If you choose to build on vacant land, the construction of a new home is likely to take several months or more. There is a special provision in the tax code that allows you to begin deducting some of your home loan interest before the house is actually finished.
The early tax deduction for a home under construction becomes available when you first begin to pay interest on an initial construction loan. If you intend to move into your completed home within 24 months of the start of construction, the interest on the construction loan is deductible. If the home cannot be finished within 24 months, only one 24-month period of construction interest is deductible.
Some prospective home buyers prefer to scale back on the scope of their house structural plans if surrounding acreage is available for use. A larger home tract opens up a multitude of possibilities for outdoor activities.