I heard that investment interest are deductible against my income tax...is this true? I am planning to borrow a small amount of money from my family member to make investments into various blue chip stocks, and I will pay an interest of 5.75% per year to that person. Also, would I have to issue a 1099-INT for the family member I borrow the money from or would it not be necessary since I am borrowing the money on a individual level and not as a corporation/entity as part of ordinary course of business? Thank you for your help!!
2007-08-15 16:35:18 · 5 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ Other - Taxes
You deduct it, they declare it as interest income. But you don't need to give them a 1099-Int. It might be a good idea to do so though, that way you have the documentation if the irs ever questions it.
2007-08-16 01:47:08 · answer #1 · answered by Anonymous · 0⤊ 0⤋
Yes, You can deduct this interest from your income tax. It is quite common. Just like if you were borrowing money from a bank. Usually the bank would provide you with proof of the interest which they charged you and you would use this to deduct the exact amount from your income tax liability.
In the case of borrowing from an individual, you are not obliged to issue a 1099-INT because the person you are borrowing from is an individual as well. However, you must advise your relatives to report this income on their own income tax, in case the IRS decides to cross check. This is highly unusual but it can happen. It's the discretion of the IRS.
2007-08-15 17:01:11 · answer #2 · answered by Chandru M 6 · 0⤊ 0⤋
You can deduct this but you will need to issue a 1099-Int to them so that they will claim the income. Also interest expense on deductions is deductible only against your investment income so if you didn't have enough income you will have it deferred until next year. Also for some reason that I have never understood, the investment interest actually shows up on your itemized deductions rather than in the income or gain on stocks section so if you don't itemize you won't be able to deduct it.
2007-08-15 16:50:40 · answer #3 · answered by Anonymous · 0⤊ 0⤋
You can deduct the interest to the extent of the income you make from the investment. Anything above that is not deductible.
You don't need to issue a 1099.
2007-08-15 18:43:04 · answer #4 · answered by Bostonian In MO 7 · 0⤊ 0⤋
If your family member is licensed and he could issue the actual documents stating that it is margin % .
(I think)
Check the IRS site for rules about investment %
http://www.irs.gov/
Search for investment interest , I think it's form 4952 ?
And he would have to delcare it as income .
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2007-08-15 16:43:03 · answer #5 · answered by kate 7 · 0⤊ 0⤋