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Can I deduct the interest I pay my mother from my rental income as part of Interest/Finance Charges?

Posted 25 October 2013 under Tax Q&A


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On two occasions, my mother has been kind enough to grant me funds from her positive flexi loan balance that I used as a deposit when applying for finance for investment properties. On a monthly basis I pay my mother interest on the funds she granted me. Can I deduct the interest I pay my mother from my rental income as part of Interest/Finance Charges?

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TaxTim TaxTim says:
27 October 2013 at 22:45

Do you have a formal agreement in place with your mother regarding the payment of interest and what percentage does she charge you?

Black Coffee says:
28 October 2013 at 5:43

We do not have a written agreement in place however we did agree to it verbally. I pay her the rate of interest that the bank charges her = prime - 0.95%

TaxTim TaxTim says:
28 October 2013 at 13:26

You will be able to deduct the interest, you should draw up a verbal agreement, however then she will have to include the interest in her income and be taxed accordingly. Depending on her age though she will have exemptions on the interest.

Black Coffee says:
28 October 2013 at 14:13

Thank you!

I appreciate your advice.

TaxTim TaxTim says:
28 October 2013 at 14:14

Only a pleasure!


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