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Do I need to pay taxes on interest I receive when I pay out the same amount and no gain?

daughter's house
by daughter's house 10 February 2013  |  Comments 1 comment  |  Love Love  0 loves

I bought a house for my daughter on my home equity line. She is paying me the cost of the home and paying me the interest that I am paying on the loan. I am not gaining anything. I wrote up mortgage papers for her. We paid 'cash' for the house in essence. We are both on the title but she is 100% owner occupied. I did this because she had to have a place to live and her credit is bad. My question is how do I handle that on my taxes. She is paying the interest on her portion of the home equity loan for my other house which I am renting to my other daughter till I can move back there.

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Comments (1)

  • MikeGG1
    Love rating 909
    MikeGG1 posted

    So far as income tax is concerned, you can offset interest paid against rent/interest received within a definable business.

    The problem might come from Capital Gains Tax as you can only claim relief for a property which you live in. If you are not living in it during the last 3 years of ownership, but you used to, you can also claim the last 3 years. It doesn't matter that it might not be gaining in value now, because any past gains would be apportioned across the whole period of ownership.

    Mike

    Posted on 10 February 2013 | Love Love  0 loves Report

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