Solved: Can I write off interest payments on a personal loan from a relative, which is specifically for use in building my home?
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New Member

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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Level 3

Can I write off interest payments on a personal loan from a relative, which is specifically for use in building my home?

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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4 Replies
Level 15

Can I write off interest payments on a personal loan from a relative, which is specifically for use in building my home?

Was a written loan agreement signed and filed with the county, securing the loan against the property?
New Member

Can I write off interest payments on a personal loan from a relative, which is specifically for use in building my home?

There is a written agreement, but not recorded with the county.
Level 3

Can I write off interest payments on a personal loan from a relative, which is specifically for use in building my home?

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. 

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

View solution in original post

New Member

Can I write off interest payments on a personal loan from a relative, which is specifically for use in building my home?

How do you perfect an agreement "perfected"?
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