Q. My home sale profit will exceed $250,000. Can I avoid tax on the higher amount by selling in installments? N.P.S., Long Beach, Calif.
A. Not exactly. The home sale exclusion covers the first $250,000 of gain ($500,000 for joint filers) if you’ve owned and used the home as your principal residence for at least two of the previous five years. You can’t increase the exclusion by selling on the installment basis, but you can defer some of the tax on a big gain by spreading out payments over at least two years. In addition, you might benefit from a lower long-term capital gains rate in one or more of those years.
Tip: The maximum capital gains rate on the excess is now 20% for upper-income taxpayers. Plus, the 3.8% Medicare surtax may apply.