Quick answer
- If you’re the seller (you received interest):
Report the interest as income under 1099‑INT, DIV, OID → Owner‑Financed / Seller‑Financed Interest Income. The seller cannot issue a Form 1098 to the buyer using this program. - If you’re the buyer (you paid interest):
Report the interest under Itemized Deductions → Mortgage Interest and Expenses → Mortgage interest not reported on Form 1098.
What is owner‑financed (seller‑financed) interest?
Owner‑financed (also called seller‑financed) financing happens when a buyer makes payments directly to the seller instead of using a traditional mortgage lender.
- Seller: Receives payments that include interest income
- Buyer: Pays interest that may be tax‑deductible if they itemize
Where do I report it in the program?
If you received interest income (seller)
Navigation path:
- Federal
- Income (Select My Forms)
- 1099‑INT, DIV, OID
- Select: Owner‑Financed / Seller‑Financed Interest Income
💡 Even if you didn’t receive a Form 1099‑INT, this is still taxable interest income and must be reported.
If you paid interest (buyer)
Navigation path:
- Federal
- Deductions (Select My Forms)
- Itemized Deductions
- Mortgage Interest and Expenses
Then:
- Did you receive a Form 1098? → Select No
- What do you need to report? → Select Mortgage interest not reported on Form 1098
Enter:
- Seller’s name
- Seller’s SSN or EIN
⚠️ You must have the seller’s SSN or EIN to claim the deduction.
If you’re unsure how much of your payment is interest versus principal, check your loan agreement or amortization schedule.
Important notes
- Itemizing required: You only benefit from this deduction if your itemized deductions exceed your standard deduction.
- No Form 1098: Seller‑financed loans typically do not include a Form 1098.
- Program limitation: The seller cannot issue a Form 1098 to the buyer using this program.