Borrowing Money
My parents are getting a $50,000 HELOC on their home for me to draw upon for doing rehabs. I want them to then write a check to me and I will deposit in my checking account. I want to then pay their monthly HELOC payment until I sell and pay the balance off. My question is what happens at the end of the year tax wise. They will get a 1098 for interest paid however I will have paid the interest. Can they ignore the 1098 and can I just use the interest when I sell the property? Will it be a problem if I dont have a 1098 in my name? Or is it best to have them pay the monthy payment, me to pay them monthly, and have them take the interest deduction at year end, and have them issue me another 1098? I would rather keep it as simple as possible for them and me but I dont want to get in IRS trouble.
The interest you pay on the loan from your parents is deductible business interest on your Schedule C.
In actual practice, since your parents did not make the payments on their HELOC, they would not claim the interest deduction.
If your parents do claim an interest deduction on their tax return, they would also have to report interest income they receive from you for the payments you made on their behalf. It is all a wash.
Thanks Newkid
Altough its a wash, and the way you desribe it is exactly what I want to do, will I have trouble come tax time if I use the interest but my name is not on the 1098?
Thanks Eric.