Form 6252: How to Report an Installment Sale, Line by Line

Who files Form 6252, and when

Form 6252 is the form for an installment sale: a disposition of property where at least one payment arrives after the end of the tax year of the sale. Per the IRS instructions, you file it for the year of the sale and every later year until the year you receive the final payment or dispose of the note, whether or not a payment arrives that year. Use a separate Form 6252 for each sale.

Do not file Form 6252 when:

• The sale is at a loss (losses cannot use the installment method; report the sale on Form 4797, Form 8949 or Schedule D).
• You sold stock or securities traded on an established market (IRC 453(k)(2)); all payments are treated as received in the year of sale.
• You elect out of the installment method by reporting the full gain on a timely filed return. See electing out of the installment method.
• The property is inventory or dealer property, which generally cannot use the installment method.

Form 6252 attaches to Form 1040, 1041, 1065, 1120-S or 1120 and is e-filed with the return. The IRS charges no fee to file it. For the background rules, see installment sale tax and seller financing taxes.

Which version: the 2025 form and the 2026 draft

Use the Form 6252 for the tax year you are filing. The 2025 form (for sales and payments in 2025, filed in 2026) has lines 1 through 37 in three parts. The IRS posted an early-release 2026 draft in June 2026 with the same line layout. The draft is not for filing; check the final 2026 form before you file your 2026 return.

Top section: lines 1 through 4, including the property type code

• Line 1, description and code. The instructions ask for a code and a description. Codes: 1 timeshare or residential lot; 2 sale by an individual of personal-use property (as defined in IRC 1275(b)(3)); 3 property used or produced in the trade or business of farming (IRC 2032A(e)(4) or (5)); 4 all other installment sales. The code matters for Section 453A: codes 1 through 3 are outside the pledge rule, codes 2 and 3 are outside the interest charge on deferred tax, and timeshares and residential lots have their own interest rule under IRC 453(l). Most rentals, commercial buildings and business sales are code 4.
• Lines 2a and 2b. Date acquired and date sold.
• Line 3, related party. Check Yes if the buyer is a related party. If so, complete Part III for the year of sale and the 2 years after, unless you got the final payment that year.
• Line 4, price determinable. If the total selling price cannot be determined by the end of the year of sale (an earn-out, for example), it is a contingent payment sale; check No, and keep checking No in later years. See contingent payment installment sales.

Part I: gross profit and contract price (lines 5 to 18)

Part I is completed in the year of sale. The example uses the same assumptions as our seller financing calculator: a rental building sold for $1,200,000 with a $240,000 down payment and a $960,000 note at 6.5%.

The straight-line building depreciation here is unrecaptured Section 1250 gain, not recapture income, so line 12 is zero. It stays inside the gain and is reported first as payments arrive (Treas. Reg. 1.453-12).

Part II: installment sale income (lines 19 to 26), every year

• Line 19, gross profit percentage. Line 16 divided by line 18, as a decimal rounded to at least 4 digits. Example: 728,000 / 1,200,000 = 0.6067. In later years enter the percentage from the year of sale.
• Line 20. In the year of sale only, the amount from line 17.
• Line 21, payments received this year. Cash and the fair market value of property received, including amounts used to pay off your mortgage or your selling costs at closing. Do not include interest or the buyer's note. Example year one: $240,000 down plus $10,730 of principal = $250,730.
• Line 22. Line 20 plus line 21.
• Line 23. Payments received in prior years (zero in the year of sale).
• Line 24, installment sale income. Line 22 times line 19. Example: $250,730 x 0.6067 = $152,118.
• Line 25. Ordinary income recapture under Sections 1252, 1254 or 1255, or recapture left over from pre-June 1984 sales. Section 1245 and 1250 recapture does not go here; it went on line 12 in year one.
• Line 26. Line 24 minus line 25. Business or rental property held over a year goes to Form 4797, line 4; a capital asset goes to Schedule D. For a building, use the Unrecaptured Section 1250 Gain Worksheet in the Schedule D instructions to carry the 25% layer.

In year two of the example, line 21 is $11,449 of principal, and line 24 is $11,449 x 0.6067 = $6,946. The interest the buyer paid ($62,084 in year one) goes on Schedule B as ordinary interest income.

Form 4797 and depreciation recapture

Recapture under Sections 1245 and 1250 (including Section 179 and Section 291 amounts) is taxed in full in the year of sale, even if you receive nothing that year, under IRC 453(i). Figure it in Form 4797, Part III. The recapture on Form 4797, line 31 goes on Form 6252, line 12 and on Form 4797, line 13. Do not enter gain for that property on Form 4797, line 32; if you used Form 4797 only to compute recapture, enter "N/A" on line 32. Because line 12 is added to basis on line 13, the recapture is not taxed twice. More on the year-one bill: depreciation recapture on an installment sale.

Part III: related party sales (lines 27 to 37)

If you sold to a related party (spouse, child, grandchild, parent, sibling, or a related corporation, partnership, estate or trust), complete Part III for the year of sale and the 2 years after. Line 27 is the buyer's name, address and taxpayer number. Line 28 asks whether the buyer resold or otherwise disposed of the property that year. Under IRC 453(e), a second disposition within 2 years (no time limit for marketable securities) accelerates your remaining gain: lines 30 through 37 treat the related buyer's amount realized, up to your contract price, as a payment to you.

Line 29 lists the exceptions: resale more than 2 years later; stock sold back to the issuing corporation; an involuntary conversion; a resale after the death of either party; or no tax avoidance purpose (attach an explanation). Separately, IRC 453(g) generally denies the installment method for a sale of depreciable property to a related person. See related party installment sales.

What Form 6252 does not cover

The Section 453A interest charge on deferred tax for notes over $5 million is not figured on Form 6252; individuals report it on Schedule 2 (Form 1040) per Publication 537. See the Section 453A interest charge. The pledge rule treats loan proceeds secured by the note as a payment. A sale of the note, a gift of it, or a cancellation is a disposition under IRC 453B. The minimum interest rate for the note is on the installment sale interest and AFR page. Get the full Big Sale Tax Analysis to see these numbers modeled before you sign, and run your numbers for each year of the note.

Get the full Big Sale Tax Analysis

Frequently asked questions