Seller Financed Mortgage interest

Forum|Forum|4 years ago
April 16, 2022
1 reply
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Hello,

To complete a sale of my rental property last year, I offered a buyer a great interest rate on a seller-financed mortgage. I offered a 4% mortgage rate, and i was holding a mortage already on the property with PNC for 6%. So basically, the mortgage payment I was receiving from this new (installment sale) owner was less than what my monthly obligation was on the property. So - how do I account for this loss. TurboTax is asking me to enter the seller backed interest payments received from this new buyer (split by interest and principle) but where am I suppose to enter the interest payments I paid to PNC (on form 1098 - received from PNC) to offset this seller-financed mortgage interest received. Should I just net this out and enter no interest received? Clearly, I recognized a loss on this, but yet this will be taxable without the offset. I looked everywhere and cannot find this info. Any help would be greatly appreciated.

RaifH

Enter the installment sale as you did. The interest earned from that is taxable income. You can enter the interest you paid on your old home in 2021 as an investment expense. This is an itemized deduction and cannot exceed the amount of investment income you report. To enter this in TurboTax, click Start/Revisit next to Federal > Deductions & Credits > Retirement and Investments > Investment Interest Expenses.