Yes it is taxable interest income and needs to be reported on your tax return. To report the interest income in TurboTax Online, while logged in to your return:
- Click on Federal
- Click on Income & Expenses
- Scroll down to Interest and Dividends
- Next to Interest from Seller-Financed Loans Click on Start
- Answer Yes to Any Seller-Financed Loans?
- Complete the information for the seller-financed interest you received.
You are also required to file a Form 1098 and report the amount of interest paid to the IRS and the borrower.
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