[kokosy]

Loaned to sister $100,000 to buy a home. She's apying me interest, how can I file this interest income and how can she benefit from interest payment to claim it as interest expense in her tax return. I am not the owner of the house she bought, so, technically, it's not owner financed.

[ScottGem]

She needs to sign a mortgage. You can get a promissory note from most stationary stores. Make sure you specify that the property was used as collateral for the loan. You then claim the income as loan interest and she issued her a 1099 that she can use to claim the interest on her taxes.

[kokosy]

We signed a promissory note, with the amount involved, monthly payment,a 15 year calculated principal and interest payment schedule attachment. So, no special forms to file? Somebody told me that, it could be considered as gift (could not have been, because she's repaying me back). Thanks

[joypulv]

No, the limit on a gift is currently 13K a year (last time I looked).
I have done family loans. No special forms.
There is a minimum % for intra-family loans. It's set monthly and is different rates for up to 9 year and over 9 year. It's quite low so if you didn't use it, you are probably OK.

[ScottGem]

As long as the note states it is secured by the property, then its sufficient to consider it a mortgage, You WILL need to provide a 1099 each year, which you also have to file with the IRS. If you don't, the IRS is likely to question her return.

This will not be considered a gift, since you have a note with an agreement for payback.

It would be a good idea, but not absolutely necessary to file a lien against the property using the note as proof.

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