Cash, rehab then owner financed sale

Member since 2022 · 14 posts · 1 vote

Hi there,

If you purchased and rehabbed a property with cash and then owner financed the sale. Is any of the purchase or rehab money tax deductible on the gains from buyers down payment/monthly payments.

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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
4y
@Clifford Firthh
Your tax basis will be based on your overall costs.
So let’s say you bought a property for $100k, put $50k into it, your basis is $150k. You sell it owner financing for $200k.
Buyer puts $40k down. None of the money you received is taxed.
The interest on the loan will be taxed at ordinary income rates. Once the down payment + principal payments from buyer equal the 150k then the rest of the money is taxed
Not a cpa and one can confirm above but this is my understanding
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Clifford Firthh
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Member since 2022 · 14 posts · 1 vote
4y
Quote from @Chris Seveney:

@Clifford Firthh
Your tax basis will be based on your overall costs.
So let’s say you bought a property for $100k, put $50k into it, your basis is $150k. You sell it owner financing for $200k.
Buyer puts $40k down. None of the money you received is taxed.
The interest on the loan will be taxed at ordinary income rates. Once the down payment + principal payments from buyer equal the 150k then the rest of the money is taxed
Not a cpa and one can confirm above but this is my understanding

Thank you for the information
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