You are selling a home in installments. File form 6252. Since you did not sell at a gain, it will be a wash. You have the choice to report the payments over time or to take the sale this year.
According to the tax law this would fall under the rules for installment sale. You are required to report gain on an installment sale under the installment method unless you "elect out" on or before the due date for filing your tax return (including extensions) for the year of the sale. The year of sale is the year the contract was entered into.
This is an Installment Sale.
When you sell something for more than you paid for it, you report the income on your taxes for the year in which the sale took place. Sometimes, though, the buyer spreads the payments out over more than one year. In that case, it’s what the Internal Revenue Service (IRS) refers to as an “installment sale.” Taxpayers use Form 6252 to report income from installment sales.
Form 6252 helps you figure out how much of the money you received during a given tax year was a return of capital, how much was a gain and how much was interest.
When you fill out Form 6252, TurboTax will automatically carry this year's portion of the gain to the appropriate form. It will also carry the interest portion that you entered to Schedule B and a Seller-Financed Interest Statement for Filing.
If the bank account that held any Installment payments paid any interest on the money held in that account during the year, that will be a separate 1099-Interest entry.
Just in case, here's how to enter Form 6252:
- Open (continue) your return in TurboTax, if it's not already open.
- In the search box, search for 6252 and then click the "Jump to" link in the search results.
- Follow the prompts. TurboTax will create your Form 6252.
2017-01-02An installment sale, for tax purposes, is the sale of property paid for by installment payments that span more than 1 tax year. The installment method of reporting taxes was enacted by Congress so that taxpayers can pay taxes on the sale or other disposition of property over time, when the payments from an installment sale are actually received. Without the installment method, the taxpayer would have to report a large gain even though most of the proceeds of the sale have yet to be received, because the gain would otherwise have to be reported in the year of disposition. However, losses cannot be deferred using the installment method. The applicable tax rate that is applied to any gains depends on when the payment was received, not on the sale date. Any depreciation claimed on the property must be recaptured and reported in the sale year, which will be taxed at the rate that applies, depending on the type of property. The recaptured depreciation is then added to the basis of the property to calculate the capital gain, which will be taxed at the capital gain rate.
