Solved: It depends. If you sold your property in an Instal...
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kolekona120
New Member

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?

 
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IsabellaG
Employee Tax Expert

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?

 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.

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3 Replies
IsabellaG
Employee Tax Expert

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?

 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.

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

View solution in original post

seharri
New Member

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?

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
Employee Tax Expert

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?

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

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