Saturday, February 6, 2010

Buying home in India and its tax consequences

I got the following response from IRS regarding my question on buying home in other country and taking loan from a nonlocal bank that does not issue form 1098. I am placing it here thinking that might be helpful for others.

---------------------------

NOTE: Thank you for your inquiry. Our response to your tax law question appears below. I hope this information has been helpful. If you have a follow-up question or another general tax law question, please return to our web site at: www.irs.gov.

Please do not use your "reply" button to respond to this message. More helpful information is provided at the end of this message.


Your Question Was:
Hi, I bought a home in India on a loan from Indian bank. I did not get 1098 form from them. I am a resident alien. Can I claim interest on loan that I paid them as interest under interest tax deduction with out getting 1098 form?


The Answer To Your Question Is:
Thank you for your recent inquiry.

Regarding your question on mortgage interest deduction, according to Publication 936 (Home Mortgage Interest Deduction) generally, home mortgage interest is any interest you pay on a loan secured by your (home main home or a second home). The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan.

You can deduct home mortgage interest if all following conditions are met. 1.) You file Form 1040 (U.S. Individual Tax Return) and itemize deductions on Schedule A (Form 1040). 2.) You are legally liable for the loan. 3.) There is a true debtor-creditor relationship between you and the lender. 4.) The mortgage is a secured debt on a qualified home in which you have an ownership interest. You should take the deduction on line 10 or line 11 of (such year) Schedule A (Form 1040.) Line 11 is used when the home mortgage interest amount is not reported on a Form 1098. Please see the instructions for more information.

For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. This means your main home or your second home. A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities.

The interest you pay on a mortgage on a home other than your main or second home may be deductible if the proceeds of the loan were used for business, investment, or other deductible purposes. Otherwise, it is considered personal interest and is not deductible.

Main home: You can have only one main home at any one time. This is the home where you ordinarily live most of the time.
Second home: A second home is a home that you choose to treat as your second home.
Second home not rented out: If you have a second home that you do not hold out for rent or resale to others at any time during the year, you can treat it as a qualified home. You do not have to use the home during the year. For more information see Publication 936 and Schedule A, (Form 1040) Itemized Deductions, and Instructions.

If you have any more questions on this topic please contact customer service at this number: (215-516-2000) between the hours of 6:00AM- 11:00PM (EST) Monday- Friday. Please be advised this is not a toll free number. Also, you could find and download information, including forms, instructions and publications, on our website: www.irs.gov

Thank you for using this service.


IRS forms and publications may be accessed on our web site at the following address: www.irs.gov or ordered through our toll-free forms line at: 800-829-3676
Expect delivery within 10 business days.

Other useful toll-free numbers include:
800-829-1040 IRS Tax Help Line for Individuals
800-829-4933 Business and Specialty Tax Help Line
800-829-1954 Refund Hotline
866-562-5227 Disaster Relief Toll-Free Number, Monday
through Friday, 7 am to 10:00 pm local time

We are interested in your opinion and providing the best possible service to you. Please take a moment to answer our survey at: http://www.irs.gov/help/page/0,,id=13155,00.html

This answer is based on our understanding of the facts you presented in your question. Omission of facts may affect the answer given.

Here's a tip for navigating the IRS web site. Use the "search" button at the right side of the web page. Enter key words or phrases for your topic in the entry box.

For security reasons and to protect taxpayer privacy, the IRS does not address taxpayer account-related issues for which personal, identifying information would be needed through e-mail.

Our basic Electronic Tax Law Assistance service is designed to assist the general public in complying with their Federal tax obligations by helping them with questions they have about the tax law and procedural issues. Our goal is to provide complete and accurate responses to as many taxpayers as possible.

If you have additional questions, you may contact us either by phone at 1-800-829-1040 or by email through our web site www.irs.gov.


EMPLOYEE ID: 0198874 Mr. Larmour Tel.:English--(215) 516-2000 Spanish--(800)-829-1040 msg#: 1816709

4 comments:

Zaza said...

This information is already present in the IRS website, and does not give a straight forward answer to the question of whether or not a home in India qualifies as a main or second home, and whether an INR loan from an Indian bank qualifies as a qualifying mortgage. Did you get any further information on this?

Lauren jonczak said...

Great post. I was looking up IRS tax help when I came across this post. I am glad I did because this was a very interesting read. I had no idea that buying a house in another country could effect your taxes. Thanks so much for sharing.

loanmodifications said...

I truly liked it. I was searching for such information. Thanks for sharing such an helpful post.

obama loan modification

Easy loans India said...

Thank you for the information regarding with this useful topic .It is helping me a lot and keep writing such a worthy blog.As we know that now the needs of all the people is increasing day by day so the services providing for them is also increasing by the providers in their particular area. Many Types of oans in India. like gold loan, education loan, loan against property, personal loan, etc. as per the need of customer financial institutions provide it for their customers. And to know more about the loans and the best loan rates for the customers please visit www.easyloansindia.com.