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New Member
posted Jun 3, 2019 1:02:18 PM

How to handle interest earned from a personal loan? I completed 1099-INT, but know we must fill out a Schedule B with their SSN so they can deduct interest on their taxes

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1 Best answer
Level 15
Jun 3, 2019 1:02:19 PM

If you received interest from a personal loan, YOU do not complete a 1099-INT. If anybody completes one, it is the person paying you the interest. But individuals do not usually have to file a 1099-INT, just banks and similar companies.  You report the interest from your own records. You report the interest on schedule B, but you don't send anything to the person paying you unless the loan is a mortgage. Then you send form 1098

8 Replies
Level 15
Jun 3, 2019 1:02:19 PM

If you received interest from a personal loan, YOU do not complete a 1099-INT. If anybody completes one, it is the person paying you the interest. But individuals do not usually have to file a 1099-INT, just banks and similar companies.  You report the interest from your own records. You report the interest on schedule B, but you don't send anything to the person paying you unless the loan is a mortgage. Then you send form 1098

New Member
Jun 3, 2019 1:02:20 PM

Thank you so much - this was way more helpful than the info I just got from two people at the IRS, neither of whom knew the answer. This is a mortgage so we'll do the 1098.

New Member
Jun 3, 2019 1:02:22 PM

Right. You can report this interest as if you received a 1099-INT. Just enter the payor's name, and the amount of interest you received. Since this is not a mortgage, they can't deduct this interest and no Social Security Number is needed.

Please feel free to post any additional details or questions in the comment section.


 


New Member
Jun 3, 2019 1:02:24 PM

Actually this is a mortgage, so we'll go ahead with the  1098. Thanks.

New Member
Jun 3, 2019 1:02:25 PM

OK. Good luck! Let us know if you need any help in the comment section.

New Member
Jun 3, 2019 1:02:26 PM

Hmm... IRS "Instructions for 1098", and also Publication 936 ("Home Mortgage Interest Deduction") both specify that you only use 1098 if the interest was received in the course of your trade or business.  But we did not receive the interest in the course of any trade or business.  We just made a private loan to our daughter, who bought her house using that loan.  So still not out of the woods on this one I'm afraid.  What do we do?

Level 15
Jun 3, 2019 1:02:27 PM

You don't need to do anything.  Your daughter deducts the mortgage interest she pays and keeps good records in case she's ever audited. There's an entry point for interest not on a 1098.

See this link on deductibility <a rel="nofollow" target="_blank" href="https://turbotax.intuit.com/tax-tips/home-ownership/deducting-mortgage-interest-faqs/L4a9KF9mI#loans">https://turbotax.intuit.com/tax-tips/home-ownership/deducting-mortgage-interest-faqs/L4a9KF9mI#loans</a> which includes this statement: "If the loan is not a secured debt on your home, it is considered a personal loan, and the interest you pay usually isn't deductible. Your home mortgage must be secured by your main home or a second home. "

New Member
Mar 17, 2023 9:22:06 AM

I loaned family members to buy rental real estate and they pay me interest monthly.  I understand that neither of us need to file a 1099 for the interest, just report the interest earned on my taxes.  How should it be included on my taxes?  Do I need to put their name and socials on the payer's interest, basically what goes onto the form?  Also, since the loan was used to purchase a rental property can they deduct the interest paid to me?  Thanks for the consideration