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Old 01-23-2014, 11:22 AM
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Personal Student Loan Write Off

To pay for grad school, I took a loan (with interest) from my Dad in order to get a much better interest rate than I would have if I borrowed from a lender. Can I write off the interest I have paid to my Dad in 2013 or can that only be done with a lender that can issue a 1098E?



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Old 01-23-2014, 12:23 PM
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Originally Posted by danielhase View Post


#1;To pay for grad school, I took a loan (with interest) from my Dad in order to get a much better interest rate than I would have if I borrowed from a lender.



#2; Can I write off the interest I have paid to my Dad in 2013 or can that only be done with a lender that can issue a 1098E?
#1;it depends. Aaslong as the interest rate that your charges is lower than FAR, the IRS may impute interest. This means your father must recognize interest income equal to the imputed interest and you, as a borrower, have an implied interest payment to him. To impute the interest IRS uses the AFR, applicable fed rate, compounded semiannually. The difference between the interest using the AFR and the interest actually paid I the amountof the imputed interest.Loans to family members fall under the imputed interest rules.Unless an exception applies, the IRS imputes interest on a gift loan when the interest charged is less than the AFR rate. The lender needs to include the interest in gross income.Under certain circumstances, you may deduct the interest payement. In addition, since as the lender never actually has possession of this interest income, the tax laws assume that the lender makes annual gifts to you equal to the imputed interest. Depednsing o n the amount ,more than $14K for 2013, of the gifts, the lender may have to file gift tax return. However, no interest is imputed on gift loans of $10K or less. Aslong as the loan proceeds are not used to buyt income producing pty,i.e., stocks, bonds or similar pty.


#2;as mentioned above.Correct; Depending on your other income, you might get to take a deduction for the student loan interest (reported on 1098E)you paid.1098E is the information return on which financial establishments, government agencies, and educational institutions that receive student loan payments are required to report to the IRS. The form is used for claiming the Student Loan Interest Deduction,



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