Installment Sale Tax Calculator

Installment sales spread capital gains tax across years matching cash receipts.

Sale price

Adjusted basis

Down payment

Contract term years

Marginal tax rate %

Year 1 tax on sale

$28,560

Gross profit %

0.6%

Total gain

$600,000

How the math works

Gross profit % = gain / price. Year 1 gain = down × profit %. Tax = gain × rate.

($1M − $400k) / $1M = 60% gross profit. $200k × 60% = $120k year 1 gain × 23.8% = $28,560 tax.

How to Use

Enter sale price.
Enter adjusted basis.
Enter down payment.
Enter contract term years.
Enter marginal tax rate %.
Read year 1 tax on sale.

Frequently Asked Questions

Installment sale rules?

Section 453: capital gain recognized as cash received, not at sale. Gross profit % = total gain / total contract price. Each payment includes return of basis + recognized gain (taxable). Interest on installment note: ordinary income. AFR (applicable federal rate) minimum interest required. Depreciation recapture: not eligible for installment treatment, fully recognized in year 1. State conformity: most states. Risk: buyer default leaves seller with property + tax already paid on gain through that point. Best for: long-term hold sellers wanting deferred recognition.

How is this tax impact computed?

Tax outcomes depend on filing status, income bracket, depreciation schedule, basis adjustments, AMT exposure, and state conformity. Real estate tax planning typically involves cost segregation, 1031 exchanges, opportunity zone, depreciation recapture, passive activity rules, and entity structure (LLC vs partnership vs S-corp). This calculator provides directional analysis — final position requires CPA review.

State conformity?

States vary on conformity to federal tax code: California, NY, MA decouple selectively. Bonus depreciation: most states reduce or eliminate. QBI: most states don't conform. Section 1031: federal-only deferral, some states require state-level recapture. Property tax cap: state-specific (CA Prop 13, MI Headlee, FL SOH). Multi-state property requires apportionment analysis.

When to prioritize this strategy?

Tax strategies have setup cost, complexity, and audit risk. Cost segregation: $5–15k study, materially helps high-basis investors. 1031: 45/180 day deadlines, identification rules, qualified intermediary fees. Opportunity Zone: long hold required. Stack strategies: don't double-count benefits. CPA + tax attorney coordination essential for $1M+ strategies.