Installment sales are useful for lowering capital gains taxes, where the income can be delayed until they are taxed at lower rates. ... The first is that if an asset is sold and payments will be made over time that at least one payment be received a year after the tax year of the sale.

What is the advantage of an installment sale?

The greatest benefit of the installment sale method is lowering your capital gain tax rate, by breaking up the gain you receive from one year to several years. Selling this way can lower your adjusted gross income and applicable federal tax rate, equating to significant tax savings over time.

When can you use the installment method?

When selling depreciable property to a closely related person, you can only use the installment method if there is no tax deferral benefit from the sale. When selling depreciable property and depreciation needs to be recaptured. When exchanging like-kind property with installment payments.