How do I deduct interest from a loan from my family without a 1098?

[brb3]

I have a loan from my family that was used for major improvements to my primary home. The loan is secured debt and the home is the collateral and they are claiming the interest as income. They are not legally required to send me a 1098 because it is not part of a business.  In this years version of TurboTax, I cannot figure out where I can enter this interest. It appears to require a 1098, which does not exist in my situation. I've haven't had an issue with this in prior years. 

[PattiF]

Answer deleted

[Edited 03/22/2023|12:46 PM PST]

[brb3]

Thank you for the quick reply @PattiF . My family is NOT the seller. Is this still ok? When I choose that option, it says "You've told us that your home is being financed by the previous owner or seller" which is not the case. They just lent us money. Thanks again!

[PattiF]

No, the interest that you paid is not deductible. You will not be able to include that on your tax return.

@brb3

[brb3]

@PattiF The TurboTax site says:

What counts as mortgage interest?

Deductible mortgage interest is interest you pay on a loan, secured by a main home or second home, that was used to buy, build, or substantially improve the home.

The loan from my family is secured by my main home (we have a legal/recorded deed of trust) and it was used to substantially improve the home.  The IRS says that they are not required to file a 1098 if the "interest is not received in the course of your trade or business," which it is not.  

I did find this on The Nest website, but I do not know how to report the interest pain on line 11 of Schedule A with TurboTax:

Tax Reporting

When you have a mortgage with a commercial lender, you usually receive a Form 1098 at the end of the year. If your parents send you a 1098, your mortgage interest deduction goes on line 10 of Schedule A. However, chances are, your parents aren't going to be sending one. So, instead you report your interest paid on line 11 of Schedule A. If you bought the home from your parents, you must also list their names, address, and taxpayer ID numbers -- typically their Social Security numbers -- next to line 11

Any additional thoughts?

[PattiF]

Thank you for the explanation and your patience. The loan was used to substantially improve your home. The interest that you paid should be reportable.  

Follow these instructions to report the interest paid as a HELOC loan without a 1098:

1. Open your return and search for "1098, mortgage interest, personal" then click the jump-to link to go to the start of this section.
2. Enter the Lender’s name in the “Name of Lender” box.
3. Check the box for “None of the above." under Do any of these situations apply?
4. Follow the prompts to enter the interest you paid.
5. Check the box for "Yes, this loan is secured by a property of mine."
6. Check the box for "This loan is a home equity line of credit (HELOC)."
7. If you used a portion of these funds for something other than your home, only the portion used for your home is deductible.
8. Continue back to the Home Loan summary page to save your work.

[brb3]

Thanks again. The Search function did not provide a quick link, but I think where I need to be is Federal Taxes > Deductions and Credits > Mortgage Interest, Refinancing, and Insurance.  This is where I add the new lender, choose "none of the above" for "do any of these situations apply?" and then the next screen asks me to enter all of the information from the 1098. Which I don't have. And if I click the link that says "What if I don't have my 1098" it just tells me to go get one from the vendors website, which I cannot do.

Am I in the wrong place? Or perhaps on this screen where it says "Let's get the details from your 1098" I just enter the interest here and check the "Box 7 is checked" box to indicate the loan is secured. Then I can get to the screen where I can select a HELOC.  So even though I don't have the 1098, I enter the information that I do have and go from there. Am I on the right track?

[Mike9241]

for that interest to be deductible the loan would need to be secured by a signed instrument such as a mortgage, a deed of trust or land contract that 1) makes the borrower's ownership in the qualified property security for payment of the debt 2) provides that in the case of default, the home could be taken to satisfy the debt and 3) is recorded or otherwise perfected under state or local law