I sold rental property with a mortgage and refinanced the mortgage. How do I enter this?

Marianne Lilly — Mon, 09 Mar 2026 04:46:03 GMT

Under Installment Sales Summary I have properties I sold and enter the principal and interest each year, I owned them for more than 5 years. I didn't receive a payoff on the mortgage when I refinanced this for the borrower, and the new mortgage is in a new name (the borrower's son). How should I record this so I don't trigger a principal payoff or a sale of property owned less than a year? The mortgage balance is higher because past-due real estate taxes were added to the principal balance. Help!

Re: I sold rental property with a mortgage and refinanced the mortgage. How do I enter this?

DaveF1006 — Tue, 01 Mar 2022 23:42:48 GMT

It depends. According to the Tax on Demand guidance in Turbo Tax:

1. You can report and be taxed on the full gain in the year of sale; or

2. You can elect the installment method and only be taxed on the money you receive during any given tax year.

To research your example, I entered information into Turbo Tax on rental property owned less than a year. It did not trigger a principal payoff or sale of property owned less than a year. In other words, my example wasn't taxed on the full gain, which I believe is your concern.

Go to federal>wages and income
Less Common Income>installment sales
in the screens you will enter information such as basis, selling price, the amount of debt the buyer assumed, and most importantly, the amount of principal and interest payments received.
After everything is entered, you can see how your taxable gain from the money received was determined using Form 6252. You can go to the forms mode in your return to view this calculation. You can also see how the basis and the debt was listed on the form, that eventually determined the gross profit percentage.
Once the Gross profit percentage was determined, it was used to determine the taxable amount of your principal and interest payments.

topic I sold rental property with a mortgage and refinanced the mortgage. How do I enter this? in Home loans

I sold rental property with a mortgage and refinanced the mortgage. How do I enter this?

Re: I sold rental property with a mortgage and refinanced the mortgage. How do I enter this?