Home loan from parents
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Home loan from parents

We bought our house from my husbands parents and we pay them, rather than going through a bank. How do I file this for taxes?
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Level 9

Home loan from parents

If the loan meets the requirements of a secured debt (explained below) - please report the interest as a regular mortgage interest paid:

  1. Federal Taxes
  2. Deductions and Credits
  3. Your Home, 
  4. Select Mortgage Interest and Refinancing - enter the name of your lender and indicate (on the next screen) I did not receive a 1098, then enter the amount.

If the loan doesn't meet the requirements - it is considered a personal loan and is not tax deducible. 

Home mortgage interest is deductible only if the mortgage is secured debt. Secured debt is represented by a signed instrument (such as a mortgage, a deed of trust or land contract) that:

  • Makes the borrower’s ownership in a qualified home security for payment of the debt,
  • Provides, in case of default, that the home could satisfy the debt, and
  • Is recorded or is otherwise perfected under any applicable state or local law.

Please refer to the IRS Publication 936 for more details.

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