The interest charged on the financing of an owner-occupied home may be deducted from income for income tax purposes. This is allowed even if the house is empty or still under construction. The home to be built must then be exclusively intended to be lived in during the calendar year of deduction or the following two years.
The Supreme Court recently ruled that a dwelling rendered uninhabitable by fire, which had been demolished, was not a dwelling under construction. The Supreme Court considered that no construction work had started, nor had any concrete steps been taken from which it could be reasonably expected that construction work would start in the foreseeable future. As a result, the property did not qualify as an owner-occupied dwelling and the (mortgage) interest paid was not deductible.
In another case, a plot of land with a farmhouse was bought in 2002. Actual construction work did not start until 2008. According to the Supreme Court, according to common speech, a house under construction does not exist until construction starts. The term house under construction does not include undeveloped land as soon as there is an intention to build a house on that land in the future. This also applies when there is a structure on the land, which the taxpayer intends to demolish in order to subsequently build a house on it.
Based on the legislative history, the purchase of building land, with the intention to build, does qualify for deduction of owner-occupied housing interest.
(Supreme Court 3-10-2014, nos 13/00711 and 13/02761)