getting mortgage from my parents and tax deduction

[kutmasta]

New York

I have a question. I have a mortgage for my coop. Since the mortage charge so much interest, I may be able to borrow money from my parents and pay off.

After payoff, I have to start paying back to my parents monthly just like mortage. Now, can I still get tax deduction by paying back to my parents? I will be still paying the low interests to them, also. Is it still considered having mortage and get benefit from it tax wise?

If so, whad do i need to prove that? Is bank statement saying I paid XXX money to my parents good enought?

thank you for your advice.What is the name of your state?

 

[FlyingRon]

No. Your loan from your parents isn't "just like a mortgage" as it's not secured by the property. It's not deductible.

Here's the IRS pub on the subject:

http://www.irs.gov/pub/irs-pdf/p936.pdf

 

[tranquility]

Have your parents make a note, with the property as security, on the loan. The income to them (of the interest) will be deductable to you.

 

[anteater]

What does the IRS consider to be a "safe harbor" interest rate these days?

 

[tranquility]

That is a little harder question than it seems. I'll say, to avoid imputed interest, you need to have at least the applicable federal rate. Right now, I believe it's a little under 5%.