We sold a second home, it was personal use only. We are carrying the loan on the sale. Where do I put the down payment money and principle from the monthly payments?

[DanielV01]

Technically you don't put down the down payment and the principle.  The reason why is that you report the sale itself.  When you report the sale, you are claiming all of the principal income as capital gains at the time of the sale.  You are claiming this amount even though you have not yet received all of the money for the sale.  

Since this is the case, the principal amounts you receive going forward from the sale are nontaxable return of capital transactions that do not even need to be reported.  The interest you receive from the payments, however, is taxable to you.  (You actually should issue a 1098 or similar seller-financed statement to the buyer reporting to them the interest you received in payments).  

To enter the sale of the home itself:

• Type "Sold Second Home" in the Search box (magnifying glass)
• Click on the Jump to Link
• Answer no to question if you received Form 1099-B
• Click radial on "Sold Second Home", then Continue, and continue with that portion of the interview

To enter the interest received last year:

• Under Wages and Income, click the arrow on Interests and Dividends
• Click Start on Interest from Seller Financed Loans
  
• Select Yes to question if you received interest from Seller Financed Loans
• Proceed with interview and answer all questions related to the interest you received.

[apd75]

We have  similar situation as we are carrying the loan for a short term-5 years with a balloon at the end. Do we have to take all the profit now-around $10,000 and take a big tax hit or can we take each years principal payment then the balloon at the end. We bought for $52,000, put about $3-4,000 of improvements and sold for $65,000. Took $10,000 down and financed $55,000

[VictoriaD75]

This would be considered an installment sale. 

On an installment sale, the taxable gain reported each year is determined as follows:

Taxable gain = (Total gain realized on the sale / Contract price) x Cash collections during the year

To report the gain, you will include Form 6252 for Installment Sales. Under the installment method, you include in income each year only part of the gain you receive or are considered to have received. You don't include in income the part of the payment that's a return of your basis in the property. 

To record an Installment sale in TurboTax Online:

• Click on "Search" and type "Installment Sales" in the window and hit Enter
• Click on "Jump to Installment Sales"
• On the page "Any Other Property Sales" check the box for: "Sales of real estate, cars, or anything else for which you receive payments over two or more tax years (installment sales)" and click Continue
• If you are using Deluxe you will be prompted to upgrade to Premier
• On the Installment Sales page answer yes to "Do you want to report an installment sale?"
• Continue through the interview and record the details of your Installment Sale