Tax Help: Borrowing From Parents
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This is one in a series of tax questions from readers answered by local members of the California Society of Certified Public Accountants, to help with your 1999 and 2000 tax issues.
Q: Were I to borrow money from my parents to buy a house, could it legally be considered a mortgage loan wherein the interest payments could be tax-deductible? If this is possible, are there any legal formalities that need to be completed?
A: Yes, borrowed funds from your parents could qualify as a mortgage and allow you to deduct the interest on your tax return. The interest rate should be at market rates, regular payments should be made, and the loan must be a bona fide loan evidenced by a recorded trust deed.
--Sanford Freedman, CPA, Woodland Hills
To find a certified public accountant, visit https://www.calcpa.org. Questions and answers will also be posted on The Times’ Web site at https://ukobiw.net/taxes.
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