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Can I write off interest payments on a personal loan from a relative, which is specifically for use in building my home?
If I default on the loan, my relative gets the house and the land on which it is being built.
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June 3, 2019
1:05 PM
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Deductions & credits
Was a written loan agreement signed and filed with the county, securing the loan against the property?
June 3, 2019
1:05 PM
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Deductions & credits
There is a written agreement, but not recorded with the county.
June 3, 2019
1:05 PM
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Deductions & credits
Possibly. You can deduct interest paid on a mortgage from a private party if all of the following apply:
- "Makes your ownership in a qualified home security for payment of the debt;
- Provides, in case of default, that your home could satisfy the debt; and
- Is recorded or is otherwise perfected under any state or local law that applies."
https://www.irs.gov/publications/p936#en_US_2018_publink1000229894
If your agreement with your relative meets the above criteria, then Yes, you can deduct the interest.
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June 3, 2019
1:05 PM