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An installment sale is a sale of property where you receive at least one payment after the tax year of the sale. 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.
With the installment sale, you pay tax on each year but just on the portion of gain your are receiving plus interest.
Installment sales can also save sellers money if the income from the sale would put them in a higher tax bracket if they receive it in one year.
This is important if you are a higher-income seller, you could be subject to the 3.8% net investment income tax.
It may help you if you anticipate a large gain on the sell (you are only taxed on the actual gain). You will need to pay tax on interest though.
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