Hi and welcome to our site!The loan is not taxable income - as long as that is a true loan - and it is expected to be paid back.
As such - the loan itself is not reported to the IRS. However if that is NOT a loan, but a gift - which you are not obligated to pay back - it might need to be reported is the amount is above $100k - but there will not be any tax liability.However - if that is a true loan - no need to report.In additional when you will purchase a property - you will be ask for the proof of funds. You woudl need to show that the money are on your account and might be asked about the source of the money. If the money are borrowed - it might be helpful to have a loan agreement between you and your parents. You do not need an attorney or a complicated agreement - but a simple note might be OK. Here are some examples:
http://www.entrepreneur.com/formnet/form/807http://www.leaplaw.com/pubsearch/preview/loan.pdfBecause your parents are in a foreign country - it would be better if their signatures are notarized.
I intend to pay for the loan and the interest. My question is how to report the interest I pay to my parents? How do I report the interest payment? Does my parents need to pay taxes in the US for the interest income? Thanks.
In general - you may deduct interest payments - if that is your investment property. Your parents - as nonresident aliens do not pay any taxes on that interest in the US, but will report that income in their country of residence according to local law.However...
If the loan is a mortgage - means - the property is used as a collateral for the loan - the interest is taxable in the US for nonresident aliens.
Thanks I'm famililar with the general concept but I'm looking for "specific" - such as what form to file to IRS, what form to send to my parents (as foreign lender), etc.