Owning a home comes with tax perks. But are there unique advantages to buying a newly built home instead of a resale? The short answer: yes. Both have perks, but a newly built home might be the winner. Here’s what you need to know.
1) Construction Loans
Some buyers take out a construction loan, which converts into a permanent mortgage after building is complete.
Tax benefit: Interest paid during the first 24 months may be deductible.
Limit: Only for primary or secondary residences, up to $750,000 in mortgage debt ($375,000 if married filing separately) for loans originated after Dec 15, 2017.
2) Mortgage Deductions
Mortgage Interest: Deductible on loans up to $750,000 ($375,000 if married filing separately).
Mortgage Points: Prepaid interest equal to 1% of the mortgage; deductible in the year paid if IRS criteria are met.
Mortgage Insurance Premiums: Deductible within the same $750,000 loan limit.
3) Energy Efficiency Credits
Residential Energy Efficient Home Improvement Credit: Up to 30% of qualifying costs.
Annual limits (2023‑2025):
$1,200 for general improvements (windows, insulation, roofing, HVAC).
$2,000 for certain heat pumps, water heaters, biomass stoves/boilers.
Combined max: $3,200 per tax year. Up to 30% of qualifying costs.
New homes advantage: Some newly built homes may include energy-efficient systems, but many credits apply primarily to improvements on existing homes.
Products must have manufacturer certification to qualify.
4) Property Taxes
Deductible on both new and resale homes.
New construction edge: Taxes incurred during construction may also be deductible if paid in the same tax year.
Cap: Combined state and local tax deductions (SALT) are limited to $10,000 ($5,000 if married filing separately).
5) Quick Comparison: New vs Resale Home Tax Benefits
| Tax Benefit | Newly Built Home | Resale Home |
| Construction Loan Interest | Deductible during construction (up to 24 months, primary/secondary residence, $750K loan limit) | N/A |
| Mortgage Interest | Deductible on loans up to $750K ($375K if married filing separately) | Same |
| Mortgage Points | Deductible in the year paid, if criteria met | Same |
| Mortgage Insurance Premiums | Deductible within $750K loan limit | Same |
| Energy Efficiency Credits | N/A | Residential Energy Efficient Home Improvement Credit if upgrades meet IRS criteria |
| Property Taxes During Construction | Deductible if paid in the same tax year | N/A |
| Property Taxes After Move-in | Deductible (subject to $10K SALT cap) | Same |
Bottom line: Newly built homes offer tax perks that can start even before moving in: deductible construction loan interest, energy-efficient features, and property taxes paid during construction. Resale homes offer many of the same deductions, but new builds often maximize early-year tax savings. Always check current IRS rules and consult a tax professional to confirm eligibility for your situation.
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Julie Gordey
A lifelong educator, Julie Gordey, is a retired school administrator. After years of focusing on education, this University of Texas graduate now travels and enjoys freelance writing for BDX and NewHomeSource.com.