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Discussion Forum Index --> Basic Tax Questions --> Mortgage payments paid by someone else
Discussion Forum Index --> Tax Questions --> Mortgage payments paid by someone else
Bobkim (talk|edits) said:
| 16 May 2008
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| I have a client who borrowed $500,000 from her home and gave it to another client who used it to buy a building that he is using for business. The client who bought the building is making the mortgage payments. Does the client who gave the money have to pick up interest income and deducted mortgage interest (there would be no tax effect on her return because the interest would be fully deductible and she is not limited on her Schedule A) or can the client who bought the building just deduct the interest. Thank you.
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WesR (talk|edits) said:
| 16 May 2008
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| Hi the first client has investment interest income and expense and the second has rental/business interest expense depending on his use. You just cannot ignore the first clients loaning the money because there are state implications etc (ie here in Mass investment interest is not deductible) bye
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Death&Taxes (talk|edits) said:
| 16 May 2008
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| You might have the same problem in Pennsylvania and New Jersey.
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Bobkim (talk|edits) said:
| 16 May 2008
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| Thanks. They are both located in New York. The client with building is using it as a bed & breakfast.
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Marcilio (talk|edits) said:
| 17 May 2008
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| Interest deduction on HELOC is limited to $100k of principal. Tracing rules say that the remainder is investment interest. Your client can't deduct any of it unless she actually makes the payments. Client should prepare loan document, record it with the state, and have borrower make payments to your client.
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