Installment Sale

What is an 'Installment Sale'

A method of sale that allows for partial deferral of any capital gain to future taxation years. Installment sales require the buyer to make regular payments, or installments, on an annual basis, plus interest if installment payments are to be made in subsequent taxation years.

BREAKING DOWN 'Installment Sale'

Installment sales are common in the real estate market, but are restricted to individual buyers and sellers. Dealers are prohibited from using the installment method of income reporting.

Payers on installment sales with a deferred aggregate sales total above $5 million (for the individual sale of homes, over $150,000) will be required to include interest on the installment sales.

RELATED TERMS
  1. IRS Publication 537

    A document published by the Internal Revenue Service (IRS) that ...
  2. Form 6252: Installment Sale Income

    A tax form distributed by the Internal Revenue Service (IRS) ...
  3. Installment Debt

    A loan that is repaid by the borrower in regular installments. ...
  4. Installment Receipt

    A debt or equity issuance in which the purchaser does not pay ...
  5. Unstated Interest Paid

    The percentage of interest the U.S. Internal Revenue Service ...
  6. Annualized Income Installment Method

    A method through which a taxpayer may reduce or eliminate any ...
Related Articles
  1. Personal Finance

    Avoiding A Big Tax Bill On Real Estate Gains

    Installment sales allow sellers to defer taxes on real estate profits.
  2. Personal Finance

    Explaining Equated Monthly Installments

    An equated monthly installment is a fixed payment a borrower makes to a lender on the same date of each month.
  3. Investing

    What's a Hire Purchase?

    Hire purchase is a term used in Great Britain to describe an installment plan payment arrangement.
  4. Personal Finance

    Form 9465: Don't Pay Your Back Taxes Without It

    This form can lighten your tax load if you owe Uncle Sam.
  5. Personal Finance

    Hiring a Contractor vs. DIY: Cost – Benefits

    When you want to change something about your home, the first question to ask yourself is whether it’s more cost-effective to DIY or hire a professional.
  6. Insights

    Solar Wars: Solar City vs. Verengo Solar vs. Sungevity

    Read about three important players in the growing solar-energy services market, and learn more about their business operations and market positions.
  7. Personal Finance

    Can't Pay Your Taxes? What to Do Now

    Not enough cash on hand for your April tax bill? No need to panic. Here's what to do.
  8. Investing

    Understanding the EBITDA/EV Multiple

    The EBITDA/EV multiple is a financial ratio that measures a company’s return on investment.
  9. Investing

    What's Capitalization?

    Capitalization has different meanings depending on the context.
  10. Personal Finance

    What is an Amortization Schedule?

    An amortization schedule is a table that shows the amounts of principal and interest that comprise each loan payment.
RELATED FAQS
  1. How do small firms record installment sales?

    Read up on what an installment sale is, how to account for it and the benefits a small business may receive by using the ... Read Answer >>
  2. What are the differences between installment sales and credit sales?

    Determine the differences between credit sales and installment sales, which businesses often offer their customers for deferred ... Read Answer >>
  3. When do you use installment sales method vs. the cost recovery method?

    Take a deeper look at the installment sales method and the cost recovery method of recognizing business sales revenue and ... Read Answer >>
  4. What are the pros and cons of getting installment credit to pay off your revolving ...

    Learn how installment credit can be used to pay off revolving debt as well as the advantages and disadvantages for each type ... Read Answer >>
  5. What are the differences between revolving credit and installment credit?

    Discover how to distinguish between installment credit loans and revolving credit loans, and learn how they affect your credit ... Read Answer >>
  6. What are the differences between the installment method and percentage of completion ...

    Learn how businesses recognize revenues and report them under the installment method and percentage-of-completion method, ... Read Answer >>
Hot Definitions
  1. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  2. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  3. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  4. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
  5. Weighted Average Life - WAL

    The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Once calculated, ...
  6. Real Rate Of Return

    The annual percentage return realized on an investment, which is adjusted for changes in prices due to inflation or other ...
Trading Center