1098 w/ Grandma's SS#

[Ross]

A client's grandmother obtained a loan for my client. The 1098 has the grandmother's SS#. However, my client makes the payments directly to the bank. The grandmother doesn't itemize and therefore does not use the interest deduction. Even though the loan is not backed by my client's house, can she claim the interest deduction on her schedule A?

I see on page 4-11 it says "Interest paid on money borrowed from parents for down payment to purchase a home is personal interest, unless the parents record the loan under state or local law and the home is collateral for the loan". How do you go about recording the loan under stae or local law? TIA.

[solomon]

A client's grandmother obtained a loan for my client. The 1098 has the grandmother's SS#. However, my client makes the payments directly to the bank. The grandmother doesn't itemize and therefore does not use the interest deduction. Even though the loan is not backed by my client's house, can she claim the interest deduction on her schedule A?

I see on page 4-11 it says "Interest paid on money borrowed from parents for down payment to purchase a home is personal interest, unless the parents record the loan under state or local law and the home is collateral for the loan". How do you go about recording the loan under stae or local law? TIA.

Your client did not borrow the money from the grandmother so 4-11 does not apply.

If your client bears the burdens and benefits of ownership, then she is entitled to the interest and property tax deduction - assuming she is paying the taxes.

If the grandmother did itemize, she could not deduct the interest because she is not making the payments.

[Burke]

Even though the loan is not backed by my client's house, can she claim the interest deduction on her schedule A? TIA.

If the loan is not backed by your client's house, whose house is it collateralized against?

[erchess]

I beleive

that in order for the interest to be deductible the mortgage has to be secured by the first or second home of the taxpayer who makes the payments. Reading between the lines it looks as though grandma pledged her house to secure the loan.