How Does a Contract for Deed Work when Filing Taxes?
Contract For Deed Information A Contract For Deed, sometimes called a Land Contract, or Agreement For Deed, is a private mortgage between a buyer and seller of piece of real estate. The buyer, instead of using a bank to finance the property, enters into an agreement that works the same as a home loan. The seller draws up a sales agreement, the buyer makes a down payment and makes monthly payments to the seller. When the final payment is made, the seller transfers the deed to the buyer. Interest Payments Monthly payments on a Contract For Deed are calculated the same as conventional bank loans. Each monthly amount includes principle and interest. The interest, commonly called “juice” to real estate investors, represents the seller’s profit. Usually, a seller will provide his buyer with a payment schedule that details how much interest, in dollar figures, the buyer pays each month. This information can be used when a buyer prepares his or her income taxes. Filing Taxes When filing income
