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    vijsar's Avatar
    vijsar Posts: 1, Reputation: 1
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    #1

    Oct 28, 2011, 02:05 PM
    Mortgage interest paid to foreign persons (Parents)?
    US citizen taking loan from his Israeli parents to buy property in US..

    1. To qualify for the mortgage interest deduction what are the requirements for a foreign mortgage? (especially since it is from his parents)

    2. Since he is a US citizen, purchasing US property from a foreign person I think there is a requirement for him to file a form with the IRS listing the interest on the loan. What these requirements are.
    ebaines's Avatar
    ebaines Posts: 12,131, Reputation: 1307
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    #2

    Oct 31, 2011, 01:23 PM
    1. He can take the mortgage home deduction if (a) the money is used to buy, build, or improve his home, and (b) the loan agreement specifies that it is secured debt, meaning the property is collateral in case he defaults and (c) the loan is properly recorded as a mortgage per local requirements (typically with the county or town). The parents should consult with an attorney to draw up the mortgage documents, ensure that the interest amount meets IRS guidelines, and that the terms qualify as a loan (rather than a gift from the parents).

    2. Now I'm confused - who currently owns the property? As for filing special papers - the parents will need to get an Individual Taxpayer Identification Number (ITIN) from the IRS, which the son will indicate on his Schedule A as the payee when he claims the mortgage deduction. The parents in turn will file a non-resident income tax return to report the interest paid by the son as income.
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