Tax implications for seller finance (inherited property)?

[Paul Evans Jr]

Hi everyone,

My husband and I found a property that we want to make an offer on. The original owner passed away unexpectedly ~1 year ago and their children inherited the property. There’s no mortgage and it has been on the market for a while, so we think this might be a good opportunity to offer seller financing (our first foray into it). However,we’re wondering if that makes sense from the seller’s perspective. The property hasn’t significantly appreciated over the last year so they won’t owe much, if any, in capital gains tax. Would they have to pay taxes on the income from seller financing? Or just the interest? I’m hoping this can be a win-win for both us and the seller. Thanks in advance!

[Joseph Palmiero]

Assuming no gain on the sale, they would pay tax on the interest portion only.