Taxes on Property Selloff

[Frank DiGiorgio]

Hi All!

I purchased a farmhouse on a 5 acre parcel in Upstate NY for $375k. I subdivided 3.5 acres, and kept the house for LTR.

I sold the land for $105k and asked my lender for a partial lean release. They agreed and require me to contribute just 10% of my original loan amount of $290k. They would recast my mortgage to reflect a lower balance due, and subsequent lower mortgage payment. I could contribute the full $105k toward my original loan and increase my monthly revenues, or I could pocket and reinvest the $76k ($105 minus the required 10%). I know I would need to pay income tax on the 76k if I took it, but what are the tax ramifications if I apply it toward the principle. Or am I missing another strategy all together?

Thanks all! I really appreciate your input!