Severn, MD: Installment Sale to the Rescue

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Services for Real Estate Pros with Lisa D Church CPA, EA, MBA, NTPI Fellow

You've finally found a buyer for the rental property, land, or business you've been trying to sell but the buyer doesn't have enough cash to pay the full purchase price in a lump sum. So you agree to an installment sale. The buyer will make a partial payment now and pay you the balance over several years, with interest. The deal's done, now what about your taxes?

Pay as You Go

Because you'll receive the payments over more than one tax year, you can defer a portion of any taxable gain realized on the sale. You'll report only a proportionate amount of your gain each year (plus interest received) until you are paid in full. This lets you pay your taxes over time as you collect from the buyer.

Reduce Surtax Exposure

The installment sale also might help limit your exposure to the 3.8% surtax on net investment income. Capital gains are potentially subject to this surtax (in addition to regular capital gains tax) but only in years when your modified adjusted gross income (AGI) exceeds a threshold amount: $200,000 if you file as a single or head of household taxpayer, $250,000 if you file a joint return with your spouse, and $125,000 if you are married and file a separate return.

 If your AGI is typically under the threshold, recognizing a large capital gain all in one year could put you over the top, triggering the additional 3.8% tax. By reporting your gain on the installment method, you may be able to stay under the AGI threshold and minimize your tax burden.

Take Note

The installment sale method isn't available for sales of publicly traded securities and certain other sales. And you have the option of electing out of installment sale treatment and reporting your entire gain in the year of sale. Electing out may be advantageous under certain circumstances: for example, if you have a large capital loss that can offset your entire capital gain in the year of sale. Contact your tax advisor for information that pertains to your particular situation.

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My practice is in Severn, MD.

I specialize in the following services for both businesses and individuals:

Tax Services:

Tax Preparation & Tax Planning

Virtual Tax Preparation

Audit Protection

IRS Tax Problem Resolution

 

Accounting & Bookkeeping Services:

Outsourced Accounting and Bookkeeping

Payroll Services

Business Consulting

Outsourced CFO Services

QuickBooks Set up and Support Services

 

Who we serve:

We have special expertise in serving the following industries:

Small Business Owners

Real Estate Investors

Medical Practices

Attorneys & Law Firms

Individuals

 

Contact me for any help needed at:

Lisa D Church, CPA, EA, NTPI Fellow, MBA

7865 Clark Station Rd

Severn, MD 21144

email: lisa@waterfronttax.com

website: https://waterfronttax.com

call 877-727-6577 to talk to office support 24/7 to schedule appointments

Or Schedule a free consultation directly on my calendar at https://waterfronttax.setmore.com/

 

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