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Per IRS Publication 523 Selling Your Home, starting on page 16:

Report any interest you receive from the buyer. . If the buyer is making payments to you over time (as when you provide seller financing), then you must generally report part of each payment as interest on your tax return. Report the interest portion of the payment as ordinary income on Form 1040 or 1040-SR, line 2b, or Schedule NEC (Form 1040-NR) if a nonresident alien. If the buyer is using the property as a first or second home, also report the interest on Schedule B (Form 1040), Interest and Ordinary Dividends, to Form 1040 or 1040-SR and provide the buyer's name, address, and social security number. There is a $50 penalty per  requirement for failing to meet any of these requirements.

If you’re a nonresident or resident alien who doesn’t have and isn’t eligible to get a social security number, you may be issued an individual taxpayer identification number (ITIN). If you don’t have an ITIN, apply for one by filing Form W-7, Application for IRS Individual Taxpayer Identification Number. If needed, a nonresident or resident alien buyer can apply for an ITIN as well.

For more information on installment sales, see IRS Publication 537 Installment Sales.

To enter the interest income from a seller-financed mortgage into the TaxAct® program:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Investment Income in the Federal Quick Q&A Topics menu to expand, then click Interest income from Seller Financed Mortgage(s).
  3. Click + Add SFM Statement to create a new copy of the form or click Edit to review a form already created.
  4. Continue with the interview process to enter all of the appropriate information.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.


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