I sold my home in Texas and owner financed it for 5 years. Since the deed transferred to the new owner, I know I cannot deduct the property taxes, but can I deduct the mortgage insurance and mortgage interest?

ANSWER

The BIDaWIZ Team's Answer:

Generally in a wraparound mortgage, the seller recognizes interest income via schedule B on the note they hold and issues a 1098, and then deducts the interest paid as investment interest on the underlying mortgage via Schedule A. This is referenced in IRS Publication 936 & IRC Section 453. As you noted only the buyer would be able deduct to the real estate taxes.