If you’re selling a prime piece of real estate, you can probably get top dollar in today’s market. But it may be worthwhile to structure the deal so you receive payments over several years.
Strategy: Sell the property on the “installment sale” basis. As long as you receive payments from the buyer in two or more tax years, you don’t owe current tax on all of your gain in the year of sale.
Not only does this defer the tax, it may also reduce your overall tax bill on the gain.
Recent tax-law changes further encourage real estate sellers to use the installment-sale method.
Here’s the whole story: Under the installment sale rules, only a portion of the gain is taxable in the year in which you receive a payment. Also, the taxable portion on the sale qualifies for favorable capital gain treatment.
The current maximum federal income tax rate on long-term capital gains is 20% for taxpayers in the highest ordinary income tax bracket...(register to read more)