United States · Selling property over time · Form 6252
Installment sale tax calculator.
If the buyer pays you over several years, you can report the gain as the money arrives instead of all in the year of sale. Enter the sale terms to get the gross profit percentage from Form 6252 and the taxable gain for each year.
In the Publication 537 example, a property sold for $25,000 with a $15,000 mortgage assumed by the buyer, $19,000 basis and $1,000 of selling costs has a gross profit of $5,000, a contract price of $10,000 and a 50% gross profit percentage, so half of each payment is gain. Selling land for $400,000 with $100,000 basis over nine years, a single filer with $20,000 of other taxable income pays about $2,460 of federal tax on the gain instead of $37,583, under the assumptions below.
Your numbers
Your result
How this is calculated
- Installment basis. Adjusted basis plus selling expenses plus depreciation recapture income (Pub. 537, Worksheet A).
- Gross profit. Selling price minus the installment basis. If it is zero or less you cannot use the installment method.
- Contract price. Selling price minus the mortgages and debts the buyer assumes, plus any amount by which those debts exceed your installment basis.
- Gross profit percentage. Gross profit divided by contract price. You report that share of every payment, other than interest, as gain.
- Mortgage over basis. The part of an assumed mortgage above your installment basis counts as a payment in the year of sale.
- Recapture. Depreciation recapture is ordinary income reported in full in the year of sale, even if no payment is received that year (Pub. 537).
Worked example: Publication 537, $25,000 sale with an assumed mortgage
| Line | Amount |
|---|---|
| Selling price | $25,000 |
| Mortgage assumed by buyer | $15,000 |
| Installment basis ($19,000 + $1,000) | $20,000 |
| Gross profit | $5,000 |
| Contract price ($25,000 minus $15,000) | $10,000 |
| Gross profit percentage | 50% |
| Gain on each $2,000 payment | $1,000 |
Publication 537 gives this example with a $2,000 down payment and four later payments of $2,000. When the assumed mortgage is larger than the installment basis, as in the book's second example ($9,000 price, $6,000 mortgage, $5,000 basis), the excess of $1,000 is a payment in the year of sale and the percentage becomes 100%.
With the calculator's default land sale, gross profit is $280,000 on a $400,000 contract price, a 70.00% percentage. Spread over nine tax years the tool estimates $2,460 of federal tax against $37,583 for taking it all in one year, a difference of $35,123. The saving comes from the 0% long-term rate band (taxable income up to $49,450 for a single filer in 2026): each year's gain lands mostly inside it, while a one-year sale pushes nearly all of it into the 15% band. At higher incomes the gap shrinks, and this estimate leaves out state tax, interest and the 3.8% net investment income tax.
What this does not cover
- Interest on the buyer's note, stated or unstated, which is ordinary income each year. Enter principal payments only.
- The 25% rate on unrecaptured section 1250 gain, the 3.8% net investment income tax and the interest charge on deferred tax that Publication 537 describes for large installment sales.
- Sales to related persons, where the installment method can be denied for depreciable property, and dealers, inventory and publicly traded property.
- Contingent payments, a price reduced later, repossession, a note payable on demand and any other property you receive as a payment.
- The exclusion for a main home. Use the home sale exclusion calculator first and enter only the gain that remains.
Method and assumptions
Gross profit, contract price and gross profit percentage follow Publication 537 Worksheet A and the "Buyer Assumes Mortgage" rules. Federal tax in the comparison treats the recapture as ordinary income in the year of sale and the rest of the gain as long-term gain taxed at 0%, 15% or 20% on top of your other taxable income, with 2026 brackets for every year. It does not layer unrecaptured section 1250 gain; for that, use the recapture calculator. The last payment absorbs any rounding so the gains add up to the gross profit.
Results vary with your actual income, deductions, credits and filing situation. This page uses the figures you enter and published IRS rules; it does not predict what you will earn or owe. This is general information, not tax, legal or accounting advice; confirm your own situation against the linked IRS instructions or with a qualified preparer. Nothing here collects or stores personal data.
Sources
- IRS Publication 537, Installment Sales, retrieved October 26, 2026
- IRS Publication 544, Sales and Other Dispositions of Assets, retrieved October 26, 2026
- IRS Rev. Proc. 2025-32 (2026 brackets, standard deduction, capital gains breakpoints), retrieved October 26, 2026
Cite this page: TNAADO Tools, "Installment sale calculator," tools.tnaado.ca/us/installment-sale-tax-calculator/, figures retrieved October 2026.
Common mix-ups
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Often assumedWith an installment sale I can push depreciation recapture into later years along with the rest of the gain.
What the source saysPublication 537 says depreciation recapture income is reported in the year of sale whether or not you receive a payment that year. Only the gain above the recapture amount is spread over the payments. [1]
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Often assumedA mortgage the buyer takes over is never treated as a payment to me.
What the source saysPublication 537 treats an assumed mortgage as a recovery of basis unless it is more than your installment sale basis. The excess is treated as a payment received in the year of sale. [1]
Checked against these sources on .
Frequently asked questions
What is the gross profit percentage?
It is the gross profit from the sale divided by the contract price. Publication 537 says you apply it to each payment, after subtracting interest, to find the part that is installment sale income.
How is the contract price different from the selling price?
The contract price is the selling price minus mortgages and debts the buyer assumes, plus the amount by which those debts exceed your installment basis. If the assumed mortgage is at least the basis, the percentage is 100%.
Does the installment method defer depreciation recapture?
No. Publication 537 says depreciation recapture income is reported as ordinary income in the year of sale whether or not you receive a payment. Only gain above the recapture is reported as payments come in.
Can I choose to report the whole gain in the year of sale?
Yes. You can elect out of the installment method by the due date, including extensions, of the return for the year of sale, by not reporting the sale on Form 6252 and reporting it on Form 8949, Form 4797 or both.
Does an installment sale lower my tax?
The total gain is the same. Reporting it over several years can lower the tax when it keeps some gain in the 0% long-term rate band or out of a higher bracket, so the saving depends on your other income. This page estimates it for federal income tax only.
Is interest part of the installment gain?
No. Interest is reported separately as ordinary income, and it is not part of the selling price in the gross profit calculation.
Not tax advice
This is an educational estimate built from the numbers you enter and published IRS rules. It is not tax advice and does not predict what you will earn or owe. Owe the IRS and want a payment plan instead? That is a different tool: the IRS installment agreement calculator.