How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Robin D. Your Own Question

Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7715
Experience:  15years with H & R Block. Divisional leader, Instructor
14155347
Type Your Tax Question Here...
Robin D. is online now
A new question is answered every 9 seconds

We mad a personal loan (above 100k) to a relative several years

Resolved Question:

We mad a personal loan (above 100k) to a relative several years (2008) ago since they could not get any credit. We used our equity line to finance that loan. They are now in a position to payback the loan with interest. The question is, can we offset the earned interest with the one we paid for the equity line ?
Submitted: 1 year ago.
Category: Tax
Expert:  Robin D. replied 1 year ago.

Robin D. :

Hello and thank you for using Just Answer,
If you took out a loan for reasons other than to buy, build, or substantially improve your home, it may qualify as home equity debt. There is a limit on the amount of debt that can be treated as home equity debt. The total home equity debt on your main home and second home is limited to the smaller of:





  • $100,000 ($50,000 if married filing separately), or




  • The total of each home's fair market value (FMV) reduced (but not below zero) by the amount of its home acquisition debt





Robin D. :

You would have to look to any other mortgage you had on your home.

Robin D. :

If you did not have any then you may be allowed to use the interest you paid on the equity line of credit.

Robin D. :

If you already had to pay back the interest on the Equity line of credit but did not claim the interest in the year you paid because your debt was already over the limit then you would not be able to claim it now either unfortunately.

Robin D. :

Interest on amounts over the home equity debt limit generally is treated as personal interest and is not deductible.

Robin D. :

Did you claim the interest you paid on the equity line in past years on your Schedule A?

Robin D. :

The system said you were typing but no post is showing.

Customer:

No we have not claimed the interest. But I am just checking the 2011 return to make sure.

Robin D. :

If you did not and you are not limited because of any other mortgages then you could amend your past returns (3 years0 and claim the interest.

Customer:

The house is worth way more, so I gues sthe answer to the first question would be 100,000

Robin D. :

It looks as though you will not be allowed to claim the expense. Did you have a binding loan agreement that stated this was a loan?

Customer:

The interest of the first mortgage is claimed in the Schedule E ( we have rented the home). However we did not claim any interest of the second mortgage.

Customer:

Yes we have a loan agreement.

Robin D. :

If you used rental property to secure the loan I will need to check to see if that would fall under business use (I am thinking no but need to check)

Robin D. :

You may be able to look to investment expense. The interest though would be for the year you paid it so that would require amending then carrying forward till you have investment income (the interest they pay you).

Robin D. :

You could not use the investment expense unless you incurred it in the same year they pay but the amending would carry it to the year they pay you the interest and then you would be showing the income so your expense would count.

Customer:

Thank you. We have not filed 2012 yet. So we could amend 2010 & 2011.

Robin D. :

Yes

Robin D. :

You would need to amend both of those.

Robin D. :

My goal is to provide you with excellent service today. If there’s anything else I can do, let me know – it’s been a pleasure working with you and I hope to assist you again soon!

Customer:

Can we use the gift excemption for the remainder of the interest ?

Robin D. :

Only if you are going to gift them the total amount. The gift will not assist you though (you cannot deduct it). You would not have to pay tax on the amount you gift them form this loan and you should have mad ethe gift in the year you gave them the money really (filing the 709 then).

Customer:

O.K. thank you.

Robin D. :

Your positive rating is always thanks enough.

Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7715
Experience: 15years with H & R Block. Divisional leader, Instructor
Robin D. and 8 other Tax Specialists are ready to help you

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3052
    15+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3229
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    6121
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2783
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2231
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
 
 
 
Chat Now With A Tax Professional
Robin D.
Robin D.
Tax Professional
7715 Satisfied Customers
15years with H & R Block. Divisional leader, Instructor