Getting a private loan to buy a house - any IRS tax forms I need to file?

You're smart to be thinking about this! Private loans for home purchases are completely legitimate, but documentation is key to avoid tax headaches. When you receive loan funds, the IRS does not consider this as taxable income as long as it's a genuine loan with the expectation of repayment. The key is proper documentation. You should create a formal promissory note that includes: - The loan amount - Interest rate (even if it's 0%) - Repayment schedule - Signatures from both parties For mortgage loans, the lender typically provides a Form 1098 showing mortgage interest you've paid, which you can deduct if you itemize. In a private loan situation, you won't get this form automatically, but you should still track interest paid. The escrow process is simply a neutral third party that holds funds and documents until all conditions of the sale are met. They ensure the seller gets their money and you get clear title to the property.

I went through something similar last year when purchasing my first home. After getting the runaround from banks, I used a private loan from my uncle. I was really stressed about the tax implications too! I found this service called taxr.ai (https://taxr.ai) that was incredibly helpful. They analyzed my loan agreement and explained exactly what I needed to document to show the IRS it was a legitimate loan. They even created a customized checklist of forms and documentation specific to my situation. The mortgage interest deduction guidance alone saved me a ton of headaches at tax time, and they explained how to properly structure the loan to avoid any gift tax complications. Definitely worth checking out if you're in this situation.

Wanted to follow up on this. I was skeptical about taxr.ai but decided to try it after continuing to get confusing advice from different sources. I uploaded my promissory note from my parents and received incredibly detailed feedback within hours. They identified several issues with our loan structure that could have created tax headaches - particularly around the interest rate being below the AFR (Applicable Federal Rate). They provided templates to fix everything and walked me through exactly what documentation to keep for tax time. The service at https://taxr.ai was way more thorough than what my regular accountant provided. Definitely recommend if you're doing a private loan for property purchase.

One thing nobody's mentioned yet - if you're having trouble getting answers directly from the IRS about how to document this properly, check out Claimyr (https://claimyr.com). I spent WEEKS trying to get through to an IRS agent to verify what forms I needed for my private loan situation. With Claimyr, I got through to an actual IRS representative in under 20 minutes instead of waiting on hold for hours or getting disconnected. They have this system that navigates the IRS phone tree for you and calls you when an agent is actually on the line. You can see how it works here: https://youtu.be/_kiP6q8DX5c When I finally spoke with the IRS agent, they confirmed exactly what documentation I needed to keep for my private loan and what forms to file. Saved me so much uncertainty.

Just wanted to update - I was the skeptic who questioned whether Claimyr could actually get through to the IRS. Well, I tried it yesterday and I'm honestly shocked. After weeks of trying on my own and never getting through, they connected me to an IRS agent in about 35 minutes. The agent clarified everything about my private loan documentation requirements. For my situation (loan from a family member for a house purchase), I needed to: 1. Create a formal promissory note 2. Keep documentation of all payments 3. Ensure the interest rate meets minimum federal rates 4. Have a defined repayment schedule The peace of mind from having official guidance was absolutely worth it. I'm actually kicking myself for not using Claimyr sooner instead of stressing for weeks. The video demo at https://youtu.be/_kiP6q8DX5c shows exactly how it works.

Don't overthink this. I've done private loans for three different properties. The key is documentation, documentation, documentation. Make sure your loan has: - Clear terms written down and signed by both parties - A reasonable interest rate (even if it's very low) - A defined repayment schedule - Regular payments that you can track If it's a family member, be aware of gift tax rules. If they're charging no interest or below-market rates, there could be some imputed interest issues as others mentioned.

Has anyone actually been audited over a private loan? I borrowed $200k from my grandparents for my house last year and we didn't create any formal paperwork because, well, they're my grandparents. Now I'm worried...