Side by side
Seller-carried installment sale
- The buyer puts a little down and signs a note to you.
- You are the bank. If the buyer stops paying, you foreclose to get the property back.
- Your income depends on the buyer's credit and the property holding its value.
- Fewer buyers can close, because they need you to say yes to their terms.
- Tax is spread over the payment years.
Structured installment sale
- The buyer pays in full at closing, cash or a normal loan.
- At escrow, the sale money goes to a highly rated insurance company that pays you on the schedule you pick.
- No note from the buyer, no foreclosure risk, no landlord or lender role.
- More buyers can close, because the seller can take a lower price and still net more.
- Tax is spread over the payment years.
- Payments are fixed once set and can't be sped up, and they depend on the insurance company's strength.
Run the math
Change the numbers. The tax on both kinds of installment sale is always the same, because the IRS taxes the gain as it arrives in both cases.
What is actually different
| Seller-carried | Structured | |
|---|---|---|
| Tax treatment | Section 453 installment method | Section 453 installment method |
| Buyer pays at closing | A down payment | The full price |
| Who pays you after closing | The buyer | An insurance company |
| If payments stop | You foreclose and take the property back | No buyer note to default on |
| Buyer pool | Only buyers you will lend to | More buyers can close |
| Trade-off | Buyer credit and property risk | Fixed schedule, insurer strength |
| Listing broker | Paid at closing | Paid at closing, in full |
| When it must be set up | Before closing | Before closing. Once funds reach the seller, it is too late. |
Selling land or a farm?
Ask us which kind of installment sale fits before you take an offer. The seller can often take a lower price and still net more after tax.
(805) 555-0142 · Dana Whitfield (sample line)
Tax questions answered by Hans Goldstein, Enrolled Agent, admitted to practice before the IRS, (213) 414-2808. Also read Taxes when you sell.
2026 federal long-term capital gains brackets, married filing jointly: 0% to $98,900, 15% to $613,700, 20% above (IRS Rev. Proc. 2025-32). Net investment income tax 3.8% above $250,000 of modified AGI (IRC Sec. 1411, not indexed). State tax, depreciation recapture, interest on payments and the time value of money are not shown. Hans Goldstein is an Enrolled Agent, admitted to practice before the Internal Revenue Service. Not affiliated with or endorsed by the IRS. General education, not tax or legal advice for your situation. Figures are illustrations only. Insurance products offered through Goldstein & Co. LLC dba Goldstein Insurance Services, CA license 4273294.