Installment Sale

DEFINITION of '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.

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