[Gita Patel]

Gita Patel

Hi Jackie,

What are the tax benefits to a seller for offering seller financing with installment payments? I appreciate we can’t give tax advice but I just wondering what are the advantages for the seller?

thanks,
gita

[Jackie Lange]

Jackie Lange

Gita

If the seller has lived in the house 2 of the last 5 years, they qualify for IRC 121, which means if they are single, they can get $250,000 in profit tax free or $500,000 in profit tax free if it is a married couple.

So there is no tax benefit for them to sell with seller financing. But the benefit could be that they get more for their money than just putting it in the bank at 1/2%.

However, if they have not lived in the house long enough to qualify for IRC 121, then your offer to lease the house with an option to buy AFTER they qualify, will save then a lot of money. If they sell for all cash before they qualify for IRC 121, they will owe a lot of taxes. If they sell with seller financing, they are only taxed on the money they receive in the year they receive it.

If it was an investment property, it is a different story.