I am going to sell my 2 rentals to the families that currently live in them and am going to carry the mortgage. How do I reconcile the sale through turbo tax?

Forum|Forum|4 years ago
July 27, 2022
2 replies
43 views

I assume I am going to pay taxes on the payments and interest earned annually rather than as a lump sum payment.

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Best answer by Anonymous_

You should consult with a tax professional in your area and local legal counsel.

See https://taxexperts.naea.org/listing/service/individual-tax-preparation

The two transactions are installment sales and reporting can become quite complex. For properties you have been renting to tenants, you will have to prepare and file Forms 6252 and 4797 at a minimum.

See https://www.irs.gov/taxtopics/tc705

TurboTax can handle this scenario, but you are most likely going to need help with reporting it properly.

Anonymous_Answer

Level 15

You should consult with a tax professional in your area and local legal counsel.

See https://taxexperts.naea.org/listing/service/individual-tax-preparation

The two transactions are installment sales and reporting can become quite complex. For properties you have been renting to tenants, you will have to prepare and file Forms 6252 and 4797 at a minimum.

See https://www.irs.gov/taxtopics/tc705

TurboTax can handle this scenario, but you are most likely going to need help with reporting it properly.

Carl

Level 11

As an addendum, TurboTax can handle a seller financed mortgage just fine. In fact, when reporting the sale in the SCH E section, one of the questions asked is if this is a seller financed loan.

Now this does not in any way negate the recommendation you consult with a local tax professional, mainly to ensure all the paperwork on the sale is in order. Especially if your state taxes personal income. In fact, I *highly* agree with that recommendation. If you are going to do a seller financed loan on the real estate, its important you do it legally so that you have recourse through the legal system should the buyer default on the loan.

Based on the knowledge I've gained from others who have seller financed real estate, the chance of the buyer defaulting on the loan in the first 2 years is about 90%, and in the first 5 years is 100% (thus far.) So make sure you got your legal ducks in a row should you (when you) need to foreclose on the property and take back ownership. Keep every single scrap of paper concerning this transaction for a minimum of 3 years after it's paid off.