Real Estate Agent · Aliso Viejo, CA · Member since 2015 · 17 posts · 4 votes
Hi experts!
We borrowed some money from family and are paying them interest. Is the interest we pay regularly tax deductible? How do you structure the loan so everything is legit and meets IRS standards?
Since it's cheaper for us to borrow from family and will also benefit my family to make some interest money, we're likely to borrow even more in the future. If anyone has been doing this and knows how, I'd love to hear your thoughts if you don't mind.
Thank you very much for your time and expertise. :)
Yes, the interest is tax deductible. I would talk to a CPA or Lawyer about how to setup the loan so it's legit.
Remember, if you're deducting mortgage interest on your tax return return, your family who is receiving the money must report the interest as income on their return.
Deductible Only of it's a mortgage against the house, and if not used to improve the house, only up to a $100k loan, still having to be a mortgage against the house. A straight up personal loan, is not deductible.