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Indestata > Personal Finance > Taxes > Form 6252: How to Report Installment Sale Income
Taxes

Form 6252: How to Report Installment Sale Income

TSP Staff By TSP Staff Last updated: May 6, 2025 7 Min Read
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Taxpayers use Form 6252 to report installment sales when at least one payment arrives after the tax year of the sale. Rather than recognizing the full gain upfront, sellers have the option to spread their tax liability over several years as they receive payments. Form 6252 helps calculate the gain portion of each payment and report it annually to the IRS.

What Is Form 6252?

Form 6252 is a tax document used to report income from an installment sale, which is a type of transaction where the seller receives at least one payment after the year the sale takes place. This method lets sellers spread out the gain and match taxes to cash received. Sellers commonly use the installment method in the sale of real estate or businesses, especially when the buyer does not pay the full purchase price upfront.

In an installment sale, each payment received typically includes three components: a return of the seller’s basis in the property (non-taxable), a capital gain (taxable) and possibly interest income (also taxable). The capital gain portion is calculated as a gross profit percentage and applied to each installment. Spreading the gain may help sellers stay in a lower tax bracket and reduce total taxes.

ellers use Form 6252 to track and report these installment gains over time. It distinguishes installment sales from other types of transactions by breaking down each payment into its tax-relevant parts. This treatment contrasts with a lump-sum sale. In this type of sale, the entire gain is recognized in the year of the sale, regardless of when the money is received.