How can I deduct a family loan interest?

[suzanpourat]

I bought a house on an inter-family loan and it's an interest-only loan

[DoninGA]

Is the loan secured by the home you purchased or is this a personal loan from family members?

[Anonymous_]

See https://www.irs.gov/instructions/i1040sca#en_US_2022_publink53061xd0e888

You should seek guidance from a legal/tax professional to ensure the loan is structured properly.

[suzanpourat]

This is a personal family loan.

[DoninGA]

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@suzanpourat wrote:

This is a personal family loan.

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Interest paid on a personal loan is not deductible on a tax return.

[Anonymous_]

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@suzanpourat wrote:

This is a personal family loan.

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@DoninGA is correct and the interest on the loan would not be deductible in any event unless it was secured by the house you purchased.

[suzanpourat]

yes, it was secured by the house that I purchased.

[suzanpourat]

It was a loan to purchase the house and secured by the house that we purchased. It is a 9 years interest-only loan. Since I got the loan from an individual (family member), do I still need a 1098 form from him? If he doesn't provide the 1098 form, how can I deduct the interest that I paid on my tax returns?

[Anonymous_]

From 1098 is issued by those who receive $600 or more in the course of their trade or business. In this instance, reporting on Form 1098 would not be required (although the form could still be filed as a record of payment).

Regardless, you should have some sort of documentation that reflects the fact that you paid interest on a loan secured by a house that you bought with the proceeds of that loan. 

[Critter-3]

You can deduct the interest on the Sch A by filling in the seller financed loan section and entering in the loaner's name, address and SS# or EIN.  They will also need the same for you to report on their Sch B.