Deferred Interest Payment on Mortgage

[DavidMalone]

Hello, I sold a house and am essentially the mortgage lender to the person who bought it. He deferred an interest payment this year, and I'm wondering how to handle that on my taxes? Do I report the deferred payment as income for this year? Or do I not, because I received no cash? The deferred payment was added to the principal balance.

And just out of interest, how does the payee handle the deferred payment on their taxes?

Thank you for any help you can provide!

[Bsch4477 · Accepted solution]

You pay ordinary income tax in the year you receive it and he deducts it in the year that he pays it. 

[DavidMalone]

Thank you!