Cassandra has agreed to pay her mother’s loan interest. Which statement is true regarding the interest deduction?

When considering the deduction of interest paid on a loan, it's important to recognize the legal responsibilities associated with the loan. In this scenario, Cassandra has agreed to pay the interest on her mother's loan. However, since the loan is in her mother's name, she is the one who is legally liable for the debt.

Deduction for interest on loans, such as mortgages or student loans, typically can only be claimed by the person who is legally obligated to repay the loan, which in this case is Cassandra's mother. While Cassandra is making the payments, unless she is a co-signer or legally responsible for the debt, she wouldn’t be able to take the deduction herself. Therefore, her mother, who has the legal obligation, can claim the interest deduction on her tax return, benefiting from the expense incurred even though Cassandra is the one making the payments.

This highlights the importance of legal liability in tax deductions related to interest payments, emphasizing that the right to claim such deductions lies with the individual responsible for the debt.