Home Mortgage - Interest Deductions on a Mortgage with a Balloon Payment

[ctyankee]

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Hi,

I'm considering a loan with a balloon payment for my home mortgage.

For discussion purposes, let's say that I make no payments for the first two years, with payments from then on with a balloon payment at the end of the loan.

Can I deduct the interest on the loan for the first two years even though I made no actual payments during that time frame?

The reason that I'm asking is that as interest is accumulating (even though payments of the interest aren't for a while) I want to know how that is accounted for. Or can you only deduct interest that is paid in cash to a lender?

Thanks for any information or links on the subject.

Cheers,

Rich

[taxfreak]

I would think that if you arent making payments, you will not be able to deduct the interest.

[Skyhawk]

If you are a cash basis taxpayer then the deductible expenses have to be your liability and be paid by you in the year of deduction.

[ctyankee]

Thanks for the replies guys!