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    seawatcher's Avatar
    seawatcher Posts: 2, Reputation: 1
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    #1

    Aug 28, 2008, 08:58 AM
    Private mortgage loan interest for rental property deductable?
    If I get mortgage loan from a private person overseas to finance purchase of a rental property, is my interest payment of this loan tax deductable?
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
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    #2

    Aug 28, 2008, 09:49 AM
    Yes, provided you report to the IRS exactly to WHOM you are making these payments.
    IntlTax's Avatar
    IntlTax Posts: 831, Reputation: 23
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    #3

    Aug 28, 2008, 07:08 PM
    You may also need to withhold 30% tax on the interest portion of the payment (see Sec. 871 (a) and Form 1042), unless a treaty applies or the loan qualifies for the portfolio interest exception. Sec. 871(h).
    seawatcher's Avatar
    seawatcher Posts: 2, Reputation: 1
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    #4

    Aug 29, 2008, 01:40 AM
    Quote Originally Posted by IntlTax
    You may also need to withhold 30% tax on the interest portion of the payment (see Sec. 871 (a) and Form 1042), unless a treaty applies or the loan qualifies for the portfolio interest exception. Sec. 871(h).
    Is the withholding requirement still applies if the property is for personal use and not for rental?
    IntlTax's Avatar
    IntlTax Posts: 831, Reputation: 23
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    #5

    Aug 29, 2008, 05:02 AM
    Yes, the withholding applies even for a loan related to personal use property. Technically, the loan stands alone (separate from property which may secure the loan).
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