Yes, the interest paid and/or receivedof a seller-financed loan on an Installment Sale must be included on your income tax return. If you're the seller, report the interest income on Schedule B, and the buyer reports the interest as mortgage interest on Schedule A, if enough to claimed itemized deductions.
Here's how to enter seller-financed loan interest income on Schedule B:.
- Log In to Turbo Tax,
- Under Income and Expenses tab, scroll all the way down until your get to "Interest From Seller-Financed Loan", then click edit.
- The next screen is a question "Any seller-financed loan?".
- If your answer is yes on the question above, it will take you to Seller-Financed screen.
- Under Seller-Financed screen, enter the buyer's name, address, SSN of the buyer, and the amount of interest buyer paid to you.
- The amount of interest will be transferred over to Schedule B of 1040 form.
