I sold a house on a land contract. How do I show the "income" from the owner's payments and my expense for paying on a loan I still carry for that property?

[teekawi34]

2 years ago I sold our rental property on a land contract.  I have already claimed the capital gains in past tax returns.  So I am getting a monthly mortgage payment from the new owners, including their escrowed taxes at 8.5% interest.  However, I still carry a loan for that property with 5% interest.  How do I claim the "income" generated from the loan payment to me, but also deduct the expense of my own loan and time spent working with the owners?

[IsabellaG]

If you already reported the gain on the sale of this property, meaning that you did not treat this as an installment sale, but instead reported all of the gain in the year of sale, you would simply report the interest paid to you from the buyer as Interest income. Specifically, you would enter it as Interest from Seller-Financed Loans. See the screenshot below. Proceed through that section and enter all the necessary information.

As far as the interest that you pay is concerned, it’s possible that this interest qualifies as investment interest expense, which is limited to the amount of investment income you earned for the year. You report investment interest expense in the section Retirement and Investments. See the screenshot. Proceed through that section, reading all the information provided and making all the necessary entries.

There is no deduction for the time spent working with the owners.

See this link concerning Investment Interest Expense, and also see the link below.

https://turbotax.intuit.com/tax-tools/tax-tips/Investments-and-Taxes/What-Are-Deductible-Investment-...

[kshill]

I'm reading conflicting responses. LLC is involved by seller-financed property loan/contract. I currently have this question from a Cx.  

1. If property is owned by an LLC and LLC holds seller-financed property contract. 

A LLC is taxed just like a self-employed business is, you will report your income and expenses on the schedule C (self-employment) and that becomes part of your individual return.  Therefore the Interest earned from Seller-Financed Property Sale is income.

2.Or if individual is holding seller-financed property contract - interest income is reported 

You have to report the interest received on a seller-financed loan as income on your tax return as follows: 

• Click on Federal on the left side of the online program screen
• Click on Wages & income
• Scroll down to Less Common Investments and Savings
• On Interest from Seller-Financed Loans, click on the start button

[DaveF1006]

If the loan was issued by the LLC, report the interest income as income to the LLC rather than to the individual.