Legal Question in Tax Law in Indiana

Who deducts Interest in a Contract Home Purchase?

I am considering purchasing a home in a contract sale. I would make a downpayment towards the principal at the beginning of the contract, make payments to the landlord during the term of the contract (a portion going to principal and some to interest at the stated rate)and have to find a mortgage before the end of the contract term to pay the remaining principal.

The question is who can deduct the interest payments. Does the occupant of the house, whose payments are acting to decrease the overall principal amount, even though title does not transfer. Or does the interest deductibility stay with the landlord.?

Thank you


Asked on 9/09/02, 7:16 pm

2 Answers from Attorneys
C. David DuMond Law Offices of David DuMond

Re: Who deducts Interest in a Contract Home Purchase?

If your agreement is put in the language of a conditional sales agreement, your payments should be deductible. So stop referring to the seller as landlord. Check out this web site. Golod luck. http://www.irs.gov/formspubs/display/0,,i1%3D50&genericId%3D11999,00.html

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Answered on 9/09/02, 9:25 pm
Mary Ann Wunder Wunder & Wunder

Re: Who deducts Interest in a Contract Home Purchase?

You, as the buyer of the home, are entitled to deduct the interest portion of your payments on your 1040 Schedule A. There is a provision on that form to provide the name and address of the person you are paying. Likewise, the seller of the home must report the interest you pay him on Schedule B of his 1040 and give your name as the payor. Each of you will probably need the social security number of the other for proper reporting.

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Answered on 9/11/02, 9:55 am


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