Seller financing tax benefits (for seller)

[James Siller]

I’m looking for clarification for how a seller would benefit from seller financing, versus an outright sale of the property. (Besides the obvious of getting interest payments from the buyer)

Is interest paid to the seller considered income and taxed accordingly?

How is principal taxed?

Sellers are retiring and would like the extra income… so possibly in low tax bracket.

[Michael Plaks]

Quote from @James Siller:

I’m looking for clarification for how a seller would benefit from seller financing, versus an outright sale of the property. 

This is a very complex tax issue, and the answers are case by case. Here is a long older discussion on the topic: https://www.biggerpockets.com/...

As a Realtor, you should be very careful to avoid giving tax advice to your clients or even a perception of giving them tax advice. Tell them to ask their personal accountant.