How do i report interest income on a loan to a private individual?

[MargaretL]

If this is a personal loan, the interest income is entered AS IF you have received form 1099-INT.  Enter your individual’s name as a Payer's name and the amount of interest received in box 1.

1. Federal Taxes
2. Wages & Income
3. Interest & Dividends
4. Interest on 1099-INT

If you have interest from a Seller-financed loan (You have a seller-financed mortgage if you sell your home and you accept a trust deed or other repayment promise as part of the payment. You are the seller if you financed part or all of the buyer's purchase price when you sold the home.) - the data entry is located under:

1. Federal Taxes
2. Wages & Income
3. Interest & Dividends
4. Interest from Seller Financed Loans

[evil_shenanigans]

Hi @MargaretL , I'm entering this personal loan interest as a 1099-INT -- but what do you recommend I put as the employer ID number? There isn't one, obviously. Do I need to put the individual's SSN here? For privacy reasons, I'd rather not list that if I don't have to.

Turbotax doesn't like leaving that field blank, though it looks like I'll still be able to file if I ignore that warning.

[Critter-3]

There were 2 places mentioned to enter personal interest received ... one for a personal loan and the other if it is a mortgage ... make sure you are using the correct place.   

If is on a mortgage you MUST enter all the buyer's info including the SS# and  they will need YOUR information for their return ... this is how the IRS cross references your income and their deduction.   

[evil_shenanigans]

Hi @Critter-3, mine is a personal loan, not a mortgage, so I'm using 1099-INT. Still unclear what to do with the "Payer's Federal ID Number" field. I'm leaving it blank but Turbotax flags that as an error in the audit phase (though it lets me ignore it).

[dunnbob]

I entered the interest income from a 1098 just as if it was a 1099.  It did not require me to enter an SSN or TIN, but if it had required one I would have entered the SSN just as the 1098 had it - "***-**-1234". 

For privacy reasons many financial reports only show the last four digits of the SSN. 

[DianeW777]

Although the IRS seems to address only seller financed mortgages, if you did not receive a Form 1099-INT, and it is a seller financed loan then it needs to be reported as such. Including the SSN or EIN, if applicable.  Keep all of your documents together with your tax return should you need them later.

[evil_shenanigans]

I have not been able to figure this out, and omitting the EIN (because it doesn't exist) means that I can't e-file my federal or state taxes through TurboTax. Very annoying. If anyone has any advice for this I would love to hear it.

[RobertB4444]

@evil_shenanigans You should enter the interest received into a 1099-INT just as if it were received from a bank.  If you don't have the social security number of the person who paid you the interest (which is preferable so that it is a deduction for them) then leave the EIN section blank.  TurboTax will flag it but will not require you to enter it in order to file.

[pat1smiley]

How/where do I report personal loan interest that I paid if the Receiver is refusing to provide me with a 1099-INT form or any form that denotes I paid the interest?  (He doesn't want to pay tax on it is why he is refusing and yes I have his social).  Thanks

[AmyC]

I am assuming you mean mortgage interest on a house you purchased from the individual and secured by the loan. Otherwise, a personal loan is not deductible on your taxes.

If you mean mortgage loan that meets all the qualifications, there is a special place for seller paid interest. Follow these steps:

1. Deductions and credits
2. Mortgage interest, select
3. Enter name of individual, continue
4. Select property type, continue
5. Select the middle option, this is seller financed loan, no 1098
6. Enter address and SSN, continue
7. enter mortgage information

About Publication 936, Home Mortgage Interest Deduction

@pat1smiley 

[pat1smiley]

No.  It is no longer a mortgage (long story).  Its a personal loan for the balance of a mortgage after I refinanced to remove his name (he originally paid cash for house) and I don't want to deduct but I know he is supposed to report it as income for himself.

[AmyC]

Yes, you should issue a 1099-int to the person, if you paid more than $10 in interest. See:

• Form 1099-INT
• Instructions for Forms 1099-INT and 1099-OID

You can report information returns like this here.

@pat1smiley 

[Quercus]

@MargaretL I have made an AFR loan to my son-in-law so he could contribute half the cost of a house that he and my daughter purchased. This is not a seller-financed loan since I did not previously own the house they bought. In the loan contract, his portion of the house is collateral. I declare the interest income and I assume he can claim the interest paid as a deduction. They recently hired a tax professional. I have Turbotax home and business 2023.

Am I correct in assuming that the interest income is entered as if I have received form 1099-INT, and all that I need to provide him is a copy of the loan amortization schedule calculator spreadsheet and a summation of the 2023 interest paid? If I need to do something more, how would I do that with my purchased Turbotax version?

[KrisD15]

Yes, and you should also provide him with your Social Security Number. 

To CLAIM the interest as INCOME, a Social Security number is not needed, however for your son-in-law to claim the interest as a Home Mortgage Interest Deduction, the IRS will require him to list your Social Security Number.