The rehab loan for our home is from a family member, do I enter the interest expense? Do we make our own 1098 and 1099-INT forms?

[IreneS · Accepted solution]

The interest on the loan is deductible only if the mortgage is a secured debt.  According to IRS Pub. 936, Home Mortgage Interest Deduction:

You can deduct your home mortgage interest only if your mortgage is a secured debt. A secured debt is one in which you sign an instrument (such as a mortgage, deed of trust, or land contract) that:

• 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.

There must be a written, recorded document for the interest to be deductible as home mortgage interest.

You do not have to prepare a 1098 or 1099-INT form.