That's not necessarily as easy a question as it sounds. I can answer it, but my assumptions are that your daughter bought the house from you and you are the lender (as opposed to a bank being the lender). I also assume that she is legally obligated to pay the loan. You would simply need a loan amortization schedule that shows the breakdown between principal and interest for each of her loan payments. You can do the amortization by going online to any online loan amortization application (try Googling "loan amortization calculator"). The amount computed for interest would be deductible by her if she itemizes. It's technically taxable to you; report it on line 8a of your Form 1040. As for records, you would have her cancelled checks for the payments and the amortization schedule showing the breakout of P & I. You don't need to give her a Form 1098 unless you happen to be in the business of loaning money for profit. Her Schedule A would show your name, address, and SSN; that's how IRS would track it. As for the principal payments, those may not be taxable at all unless you sold the house to her and realized a gain. It that case, it may or may not be partially taxable. The handling of the principal seems to be beyond the scope of your question. In any case, reporting gain on sale could get complicated.
