I am owner financing a property, do I only have to claim the interest? What about the principle? Do I have to enter anything in the Rental income?

[IsabellaG · Accepted solution]

 It depends. If you sold your property in an Installment Sale , and are receiving periodic payments from the buyer, you may be able to  report a portion of your gain each year as you receive the payments.

You need to report the installment sale in the first year by filing Form 6252, and continue filing this form every year. Installment sale treatment isn't available if you sold the property at a loss. 

Report your installment sale in TurboTax Premier under Less Common Income, Installment Sales. See the screenshot below.

Then you would report the portion of the payments that you received that represents the gain on the sale.The interest portion would still be reported as interest income.

You don't have to do this, however. You can elect to report the entire gain in the year you sold it, and then just report the interest payments each year.

You wouldn't report any rental income unless this property was rented by you in 2017.

See more information in IRS Publication 537.

[seharri]

this question is related to tax return for B.Cale.  I have entered the interest on the installment sale in the proper schedule.  The Gain on sale is calculated correctly and appears on Form 6252 but does NOT appear in the income.  Several weeks ago the form 6252 indicated it was not final but this caution is no longer reflected.  It is only $325.00 Gain on Sale so it is probably not material but  it is not showing like it has in the past using Turbax.

[ReneeM7122]

If Form 6252 is not calculating properly, it could be because of the dates, but this is only a guess without seeing your actual return.  

Form 6252 must be filed for any year in which you received payments on an installment sale:

• In the year in which the sale actually occurred,  fill out Lines 1 through 4 and Parts I and II
• In any other year, fill out Lines 1 through 4 and Part II

Check your dates and the lines, and ensure that the correct year that the property was sold is listed.  

You could also try Deleting Form 6252, and re-entering the information.

How do I view and delete forms in TurboTax Online?

• Open or continue your return in TurboTax.
• In the left menu, select Tax Tools and then Tools.
• In the pop-up window Tool Center, choose Delete a form.
• Select Delete next to the form/schedule/worksheet in the list and follow the instructions.

@seharri

[Anonymous]

Is it better to report over several years assuming the person's tax bracket is lower in future years?

[Critter-3]

This is a decision you have to make for yourself using all the facts you have available  but if your tax rate would be lower in the future then pushing off the income into future years would seem to save you tax money. 

[split]

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@IsabellaG wrote:

 You need to report the installment sale in the first year by filing Form 6252, and continue filing this form every year.

What if the property is held in an IRA and it is the IRA doing the owner financing.  Does form 6252 still need to be filed... there are no tax consequences; all tax on gains are deferred.

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[Critter-3]

Self directed IRA accounts  DON'T file a tax return ... no form 6252 is required.  

[split]

I have been searching and searching and have not found anything close to an answer on this.  Your response is my first ray of hope.  Yes, no return is filed, but I don't trust the IRS to not still demand form 6252.   After all I'm required to file form 5500-EZ.  But as of now, I believe you are correct.