Understanding IRS Form 6252: Installment Sale Income
If you're selling property and receiving payments over time, you need to know about IRS Form 6252. This form reports income from installment sales of real or personal property, letting you spread the gains across multiple tax years.
An installment sale happens when you get at least one payment after the tax year ends. It doesn't cover sales by those who regularly deal in that property, like real estate agents, or items sold in your usual business, such as farmland to customers.
You can use the installment method for gains on these sales, reporting proceeds in later years unless you opt out.
Key Points on Form 6252
You use Form 6252 to report income from installment sales of property. File it if you've got a gain using the installment method. Remember, new rules let you defer some or all capital gains into a Qualified Opportunity Fund.
Who Needs to File Form 6252
You should file this form anytime you realize a gain on property via the installment method. Skip it if there's no gain, even with payments in later years—in that case, report on Form 4797 for businesses.
Don't use Form 6252 for sales of stock or securities on established markets; treat those as received in the sale year. Importantly, avoid filing for sales without gains, regardless of when payments come in.
Filing Form 6252 Step by Step
Start by entering your name and ID number—Social Security for individuals or EIN for corporations. Then provide details on the property: description, acquisition date, and sale date.
In Part I, handle gross profits and contract price; you complete this for every year of the installment. Part II covers the installment sale income itself. Skip Part III if you got the final payment in the tax year; otherwise, it deals with related party sales.
You can find Form 6252 on the IRS website.
Special Rules for Filing Form 6252
Since 2018, you can defer part or all of your capital gains by investing in a Qualified Opportunity Fund. To qualify, make the investment within 180 days, elect the deferral on Form 8949 with your return, and ensure it's an equity interest, not debt.
Related Tax Forms
If deferring gains to a QOF, you'll also need Form 8949 for sales of capital assets. These funds came from the 2017 Tax Cuts and Jobs Act to boost economic development and jobs. Plus, file Form 8997 annually while holding a QOF investment.
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