Dear John: I bought vacant land with the intention of building a home. Can the interest I pay on the mortgage loan be deducted from my taxes? H.R.
Dear H.R.: While the land is vacant, the interest paid is personal interest and can’t be deducted.
“When you begin constructing the house, you can start to deduct the interest, providing the home is ready for occupancy within 24 months of the beginning of the construction,” says Alan E. Weiner, a CPA and partner with Holtz Rubenstein Reminick in Melville, L.I.
If the home is not ready for occupancy with those two years then you are supposed to amend your past returns and undo the deduction for the months that don’t fall into the 24-month period.
But let’s say the house isn’t ready to be occupied for 26 months and not 24. Then the taxpayer, says Weiner, would have to amend his return for the year he began the deductions to remove two months worth of deductions. Or he can simply not deduct the interest payments for the last months of construction.
Dear John: What is going on with the Bureau of Labor Statistics? Its consumer price index calculations have been underestimating inflation for some time. It’s ridiculous to think that prices are up less than 5 percent, but the BLS keeps playing with these numbers to give the Uncle Ben cover for his interest rate cuts.
Uncle Ben’s actions are killing my retirement plans. Last year, I could get a solid 5 percent rate on a CD. Today, the best that I can do is 2.5 percent.
If inflation were really 1.5 percent to 2.5 percent, CD rates would be reasonable. But inflation is nowhere near that. All the responsible, conservative citizens are being sacrificed to keep the system going. But, it isn’t going! J.D.
Dear J.D.: I think you stated the situation regarding inflation’s effect on savers quite well. So there’s no need for me to go over that ground.
Ben Bernanke – “Uncle Ben” to you – certainly is lucky that inflation is so mild. (I say that, of course, tongue in cheek.) I have been saying in this column for years that the federal government understates inflation. Remember, lower inflation keeps down payments to Social Security recipients and other government workers with automatic cost of living increases.
One way this is accomplished is through an academically-inspired con called hedonics – i.e. today’s computers offer more “value” than those of the past so price increases really don’t count.
Second, something called geometic weighting is also used. It hypothesizes that people will just stop buying something if the price gets too high.
Yep, they know how to change statistics.
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