Deductability of mortgage interest paid to IRA ?
If my Roth IRA owns the mortgage on my residence and I make monthly mortgage payments to the IRA, is the interest portion of the payments deductable for me on my personal income tax return? Is the interest deductable if a 401k owns the mortgage?
Permalink Submitted by BruceM on Thu, 2008-08-07 20:07
Assuming this is your personal residence, whether principal or secondary, ownership of the mortgage by your IRA (traditional or Roth) would be a prohibited transaction, subjecting the entire IRA balance to being teated as a distribution for the year and a 10% penalty if the IRA owner is
Permalink Submitted by Alan Spross on Thu, 2008-08-07 21:36
With respect to the 401k loan, code section 72(p)(3) would deny the interest deduction to the taxpayer EVEN if the plan decided to record a security interest in the property.
Copied 72(p)(3) relating to plan loans:
(3) Denial of interest deductions in certain cases
(A) In general
No deduction otherwise allowable under this chapter shall be allowed under this chapter for any interest paid or accrued on any loan to which paragraph (1) does not apply by reason of paragraph (2) during the period described in subparagraph (B).
(B) Period to which subparagraph (A) applies
For purposes of subparagraph (A), the period described in this subparagraph is the period –
(i) on or after the 1st day on which the individual to whom the loan is made is a key employee (as defined in section 416(i)), or
(ii) such loan is secured by amounts attributable to elective deferrals described in subparagraph (A) or (C) of section 402(g)(3).
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