We are selling a home by owner financing. Which form do I use to pay In taxes? We charge no interest.

[Coleen3 · Accepted solution]

This is an Installment Sale.

When you sell something for more than you paid for it, you report the income on your taxes for the year in which the sale took place. Sometimes, though, the buyer spreads the payments out over more than one year. In that case, it’s what the Internal Revenue Service (IRS) refers to as an “installment sale.” Taxpayers use Form 6252 to report income from installment sales.

Form 6252 helps you figure out how much of the money you received during a given tax year was a return of capital, how much was a gain and how much was interest.

When you fill out Form 6252, TurboTax will automatically carry this year's portion of the gain to the appropriate form. It will also carry the interest portion that you entered to Schedule B and a Seller-Financed Interest Statement for Filing.

If the bank account that held any Installment payments paid any interest on the money held in that account during the year, that will be a separate 1099-Interest entry.

Just in case, here's how to enter Form 6252:

1. Open (continue) your return in TurboTax, if it's not already open.
2. In the search box, search for 6252 and then click the "Jump to" link in the search results.
3. Follow the prompts. TurboTax will create your Form 6252.

2017-01-02An installment sale, for tax purposes, is the sale of property paid for by installment payments that span more than 1 tax year. The installment method of reporting taxes was enacted by Congress so that taxpayers can pay taxes on the sale or other disposition of property over time, when the payments from an installment sale are actually received. Without the installment method, the taxpayer would have to report a large gain even though most of the proceeds of the sale have yet to be received, because the gain would otherwise have to be reported in the year of disposition. However, losses cannot be deferred using the installment method. The applicable tax rate that is applied to any gains depends on when the payment was received, not on the sale date. Any depreciation claimed on the property must be recaptured and reported in the sale year, which will be taxed at the rate that applies, depending on the type of property. The recaptured depreciation is then added to the basis of the property to calculate the capital gain, which will be taxed at the capital gain rate.

[saraabshere]

Thankyou,Now I have another question please? The original buyer stopped paying and gave the property back. We have a new buyer makong insallment payments. So 2 different people made paymens in the 2017 year because it was re sold.  How do I do that?

[Coleen3]

The two "sales are not a problem. Open a new 6252 for the second buyer. Treat the original sale as below.
Repossession
If you repossess your property after making an installment sale, you must figure the following amounts.

Your gain (or loss) on the repossession.
Your basis in the repossessed property.
 

The rules for figuring these amounts depend on the kind of property you repossess. The rules for repossessions of personal property differ from those for real property. Special rules may apply if you repossess property that was your main home before the sale. See Regulations section 1.1038-2 for further information.

The repossession rules apply whether or not title to the property was ever transferred to the buyer. It doesn’t matter how you repossess the property, whether you foreclose or the buyer voluntarily surrenders the property to you. However, it isn’t a repossession if the buyer puts the property up for sale and you repurchase it.

For the repossession rules to apply, the repossession must at least partially discharge (satisfy) the buyer's installment obligation to you. The discharged obligation must be secured by the property you repossess. This requirement is met if the property is auctioned off after you foreclose and you apply the installment obligation to your bid price at the auction.

Reporting the repossession. You report gain or loss from a repossession on the same form you used to report the original sale. If you reported the sale on Form 4797, use it to report the gain or loss on the repossession.

<a rel="nofollow" target="_blank" href="https://www.irs.gov/publications/p537">https://www.irs.gov/publications/p537</a>