It's not too often that we advise you to turn up your nose at a tax break. But if you're selling real estate this year, you may want to pay more tax than required up-front. Why? Because you'll end up ahead of the game in the end.
Strategy: Elect to bypass installment-sale treatment if it suits your needs. Instead of spreading out the tax over the years that you receive payments, you effectively "volunteer" to pay all the tax due in the year of the sale. In other words, you'll pay tax on income you haven't even received yet.
It sounds crazy, but it may be the best option for your situation, especially if an installment sale is the only way the buyer will go for the deal.
Why skip the installment-sale break?
If you receive installment payments from a real estate sale over two or more tax years, you'll pay tax on your gain in the years that payments are actually received. This tax-deferral treatment is automati...(register to read more)