I recently took a loan from my father to pay off the bank loan on the house. I signed a note for the loan and had it notarized. My father declares the interest he gets on his taxes and I deduct the interest I pay on mine. My brother's accountant made a form 1098. Is this going to show up as a debt of mine when going for financial aid?
Your brothers' accountant should not have filed a 1098 unless you father is in the business of loaning money on mortgages. Father to son mortgages gnerally should not be reported on 1098, however, they are still mortgages on a home subject to your tax deduction and his paying tax on the interest received. ed
From you post, you may not be eligible to deduct the interest you pay to your father. He must declare the income but you don't appear to meet the requirements for deducting mortgage interest. Just drawing up a note and having it notarized is not sufficient. It helps to prove that there is an obligation but still not sufficent to support a deduction. To be deductible as mortgage interest, the payments to your father must have a valid lien on your property. That is, he must have a mortgage and it must be recorded with the appropriate local agency.
Yes it will show as a debt, however, form 1098 is not appropriate for a loan unless your father is in the business of making such loans. I hope you made the house security for the loan, and filed the note with your county, otherwise you can't deduct it as home mortgage interest. ed
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