What is the minimum interest rate that the IRS will allow on a home mortgage?

SCOTT R asked:


The IRS sets a minimum rate that can be charged for a home mortgage. That number has a special name which escapes me. Anybody know?

Thanks

Bessie

Tags: Home Mortgage, Interest Rate, Irs

This entry was posted on Tuesday, January 27th, 2009 at 7:47 pm and is filed under Mortgage. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

One Response to “What is the minimum interest rate that the IRS will allow on a home mortgage?”

1. MG@cybtaxes Says:
   January 27th, 2009 at 10:49 pm

   You may be talking about the imputed interest rules.

   If you are receiving or making payments for a loan or installment sale, but little or no interest is stated on the contract, the IRS assumes a rate of interest based on the published applicable federal rate. For instance, if you sold some land on an installment sale and agreed to receive the payments over a 10-year period interest free, the IRS would determine that part of your sales price was actually interest and calculate the interest amount based on the applicable federal rate.

   There are some loans exempt from the imputed interest rules, (1) the $10,000 gift loan exception and (2) the $100,000 gift loan exception. See irs.gov for details.

   Hope this helps.

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