Home Loan Interest Deduction

[bchapple1023]

How do I deduct interest on a Securities Based Loan used to purchase primary home? We have no mortgage company or statement.

[AmyC]

Any home secured by a loan qualifies.  As long as you have a paper trail, you don't need the 1098. You will enter as though you have one. If the IRS asks for proof, you have it! Yours sch A only shows the actual allowable interest. Follow these steps:

1. Enter your return
2. Go to deductions and credits
3. Mortgage interest, start/ edit
4. Lender name - enter securities based
5. Select kind of property - primary, secondary, other
6. None of these apply
7. Enter information regarding interest, principal, etc
8. Secured by property, yes / no
9. Points select
10. Most recent form, yes
11. continue entering

[Edited 2/7/23 | 8:09 am PST]

[Opus 17]

Such interest is not deductible.  To be deductible mortgage interest, the loan must be secured by the home, and the mortgage must be "perfected" which usually means listed as a mortgage in the public county records.  A securities loan is not secured by the home, it is not deductible mortgage interest. 

[AmyC]

Opus17 is absolutely correct that the mortgage must be tied to the home. One of the questions is secured by the home, a NO there will prevent the deduction.

[bchapple1023]

I followed the instructions and when I enter “no” to “is this loan secured by a property of yours” I GET ‘sorry, this interest isn’t deductible”.   Did I miss something?

[Opus 17]

---

@bchapple1023 wrote:

I followed the instructions and when I enter “no” to “is this loan secured by a property of yours” I GET ‘sorry, this interest isn’t deductible”.   Did I miss something?

---

Loan interest  on a home is only deductible if the loan is secured by the home and is "perfected" -- that usually means the loan is registered with the county as a lien so that if you stopped payments, the home could be foreclosed.

If you borrow money to buy or build a home that is not secured by a lien on the home (like borrowing from credit cards, or your retirement funds, or other unsecured loans) then the interest is not considered deductible mortgage interest. 

[CatinaT1]

Re-read AmyC's above message. If you answer No to Is this loan secured by a property of yours? it will make the interest non-deductible. For home loan interest to be deductible, it must be secured by a property.