# Installment sale

A sale paid over time, taxed as the payments actually arrive.

For a seller it can soften a single large tax year, but the relief is paid for by carrying the buyer's credit risk, so it is a trade-off to price, not free money. It never reaches all of the gain: inventory cannot use the method, and [depreciation recapture](https://searchspheresource.com/glossary/depreciation-recapture) is reported in the year of sale whatever the terms. For a buyer it is the reason a [seller note](https://searchspheresource.com/glossary/seller-note) and the deal structure interact with the seller's tax planning.

In numbers: On a $1M gain taken $200k a year over five years, the seller is taxed on roughly the gain in each year's payment instead of the whole $1M at once. That can keep more of it in lower brackets, but if the business falters the later payments are at risk.

Source: https://searchspheresource.com/glossary/installment-sale
Not dated: A definition is editorial: what a term means, why it matters, and an example. None of it reads a source that can go stale, so there is no date to take and a stamped one would be the build time wearing a costume.

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