Here's the guidance from IRS on this
From IRS Publication 537
Figuring Installment Sale Income
You can use the following discussions or Form 6252 to help you determine gross profit, contract price, gross profit percentage, and installment sale income.
Each payment on an installment sale usually consists of the following three parts.
In each year you receive a payment, you must include in income both the interest part and the part that is your gain on the sale. You do not include in income the part that is the return of your basis in the property. Basis is the amount of your investment in the property for installment sale purposes.
You must report interest as ordinary income. Interest is generally not included in a down payment. However, you may have to treat part of each later payment as interest, even if it is not called interest in your agreement with the buyer. Interest provided in the agreement is called stated interest. If the agreement does not provide for enough stated interest, there may be unstated interest.
Please let me know what questions you may have from here