Private Mortgage Note: Income or Capital Gains?

[Austin Montgomery]

I am currently working on a commercial deal and will be purchasing the property with a private loan from some local investors. They will hold a mortgage on the property, which will be amortized over 20 years, with a 5 year balloon. Is the interest portion of the monthly payment counted as personal income or capital gains? Is there any way for the private lenders to offset some of this tax liability? Is it filed as a Schedule B? I have found differing information on the internet, so thought I would ask here! Thanks!