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I loaned my son money to buy a house. Is the money I lent…

I loaned my son...

I loaned my son money to buy a house. Is the money I lent him tax deductible on my taxes

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

I took money ou of my savings to help him buy the house. Can I take that money as a deduction?

Accountant's Assistant: Is there anything else the Accountant should be aware of?

He is paying interest on the loan so is the interest an income to me and a deduction for him?

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Answered in 3 minutes by:
3/7/2018
Fred Rook
Fred Rook, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 163
Experience: 20+ years as a Certified Public Accountant, including 19 years working in public accounting firms with extensive tax, audit, write-up and consulting experience.
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Hello. My name is ***** ***** I can assist you. The money you loaned your son to buy a house is not tax deductible. The interest that he is paying is deductible to your son and not you as he is the one officially listed as the party under the mortgage. Please let me know if you have any follow up questions for me.

Regards,

Fred

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Customer reply replied 5 months ago
Do I have to claim the interest on my tax form and do I have to file a 1099 for the interest?

Ok I misread the case here. I thought he was paying a traditional mortgage. So he is paying interest on the loan to you. Therefore, yes, the interest is income to you and a deduction for your son. Technically, yes, there should be a 1099 form filed for the interest.

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Customer reply replied 5 months ago
I was told that being I am not a professional broker, I do not have to file a 1099 but can give an informal letter to my son stating the interest he paid. Is that true? Also is there any way to reduce my tax liability when I took money from my stock and had a capital gain on it?

I did some research and because you are not in the lending business AND these loans weren't for properties that you developed, you are not required to file 1098's or 1099's, so you are correct.

Regarding your second question, you have a capital gain from selling it in the current year. If you have a carryforward capital loss carryover from prior years, you could offset your capital gain, as well as net your capital gain with any current capital losses, if any.

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Customer reply replied 5 months ago
I can not deduct the principle of the loan that was paid along with adding the interest I received as income? Is there any time I can claim the principle?

No - the loan is not deductible to you. If you ever forgive the loan, you can deduct, but you must show that there was an intention at the time of the transaction to make the loan and not a gift. If you lend money to your son with the understanding that it may not be repaid, it is considered a gift and not a loan.

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Customer reply replied 5 months ago
Thanks. I guess I have to bite the bullet and pay the large tax bill. Will I have to file estimated taxes being that this is a one time high income?

You might. Keep in mind that Uncle ***** *****kes to get his money uniformly throughout the year. If you only have W2 wages, this is simply done through withholdings. If you do have income from other sources where there is no withholding, then you might have to pay quarterly estimated taxes. If you don't, you could be subject to an underpayment penalty.

Fred Rook
Fred Rook, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 163
Experience: 20+ years as a Certified Public Accountant, including 19 years working in public accounting firms with extensive tax, audit, write-up and consulting experience.
Verified
Fred Rook and 87 other Tax Specialists are ready to help you
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Customer reply replied 5 months ago
I loose. Just like the government, they take but don't give back. I hope the new tax law doesn't hurt me too much. Thanks for your advise. I will now rate you. Have a pleasant day.

It was my pleasure. Have a great day!

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Fred Rook
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Experience: 20+ years as a Certified Public Accountant, including 19 years working in public accounting firms with extensive tax, audit, write-up and consulting experience.

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