1099-INT Interest Income
Question: How do I report interest income on an installment sale?
If a contract for the sale or exchange of property provides for deferred payments, it also usually provides for adequate stated interest payable with the deferred payments. That interest generally is taxable as ordinary income in the same manner as any other interest income. However, if the interest is not unconditionally payable at least annually, then the amount of interest to be reported for a taxable year may be subject to the provisions of the Code dealing with original issue discount.
If an installment contract doesn't provide for adequate stated interest, the amount of interest to be reported for a taxable year will be determined under the provisions of the Code dealing with imputed interest or original issue discount. You can report interest income from an installment sale payment on Form 1040, U.S. Individual Income Tax Return. If there was no gain on the sale, you can also use Form 1040A, U.S. Individual Income Tax Return, or Form 1040EZ, Income Tax Return for Single and Joint Filers With No Dependents:
- If your taxable interest income is more than $1,500, be sure to include that income on Schedule B (Form 1040A or 1040), Interest and Ordinary Dividends, and attach it to your return.
- You can't file Form 1040EZ if your interest income is more than $1,500.
- You also can't file Form 1040EZ if your interest income was received on a seller-financed mortgage. See General Instructions in Schedule B (Form 1040A or 1040) for more information.
You may receive a letter or similar document instead of a Form 1099-INT, Interest Income, or Form 1099-OID, Original Issue Discount, reporting your interest income. You still need to report it in full on your tax return.
For additional information on interest income, refer to:
- Tax Topic 403, Interest Received.
For additional information on installment sales, refer to:
Category: Interest, Dividends, Other Types of Income
Subcategory: 1099-INT Interest Income