Form 6252 Calculator: Line-by-Line Worksheet
Form 6252 reports an installment sale. Part I (lines 5 to 18) figures gross profit and contract price once; Part II (lines 19 to 26) turns each year's principal payments into taxable installment sale income. Enter the sale and this year's payments to get every line, the gain for Schedule D or Form 4797, and its unrecaptured Section 1250 part.
By Hans Goldstein · Last updated · Questions: hans@goldsteinco.net, 213-340-2018
Your sale
Form 6252 lines
What is Form 6252 used for?
Form 6252 reports a sale on the installment method under IRC 453: a sale at a gain where you receive at least one payment after the year of sale. You file it with your return for the year of sale and every year after until the note is paid off or disposed of, even in a year with no payment (Form 6252 instructions; IRS Pub. 537). A separate form is used for each sale. Losses cannot be reported on the installment method.
How do Parts I, II and III fit together?
| Part | Lines | What it does | When |
|---|---|---|---|
| I. Gross profit and contract price | 5 to 18 | Figures gross profit (line 16) and contract price (line 18) once | Every year (same numbers) |
| II. Installment sale income | 19 to 26 | Gross profit percentage x payments = this year's gain | Every year |
| III. Related party | 27 to 37 | Accelerates gain if a related buyer resells within 2 years (IRC 453(e)) | Year of sale and 2 years after |
This calculator does Parts I and II. For Part III see installment sale to a related party.
Worked example: a $900,000 rental, year of sale and year two
Cost $500,000; depreciation $180,000, of which $30,000 is Section 1245 recapture from a cost segregation study and $150,000 is straight-line building depreciation. Selling expenses $54,000. The buyer pays $180,000 at closing and $72,000 of principal a year for 10 years.
- Line 10: $500,000 - $180,000 = $320,000. Line 13: $320,000 + $54,000 + $30,000 = $404,000.
- Line 14 and 16: $900,000 - $404,000 = $496,000 gross profit. Line 18 contract price: $900,000.
- Line 19: $496,000 / $900,000 = 0.5511.
- Year of sale: line 24 = $180,000 x 0.5511 = $99,200, all of it unrecaptured Section 1250 gain. The $30,000 on line 12 is also taxed this year, as ordinary income through Form 4797.
- Year two: line 23 = $180,000, line 21 = $72,000, line 24 = $39,680, still all Section 1250 gain ($150,000 - $99,200 = $50,800 left).
- Year three: $39,680 of gain, of which the last $11,120 is Section 1250 gain and $28,560 is taxed at 0/15/20%.
The calculator loads with the year-of-sale numbers. Switch to "A later year" to see year two.
What counts as a payment on line 21?
Cash and the fair market value of property you receive in the year, including amounts withheld at closing to pay off your mortgage or your broker. The buyer's note is not a payment, and neither is debt the buyer assumes, except the part over your basis (line 17, Treas. Reg. 15a.453-1(b)(3)). A note payable on demand or readily tradable is a payment. Pledging an installment note on a sale over $150,000 as security for a loan is treated as a payment under IRC 453A(d). Interest is never a payment here.
Why is recapture on line 12 taxed in year one?
IRC 453(i) takes recapture income out of the installment method: Section 1245 recapture, and Section 1250 recapture of accelerated depreciation, is reported in full in the year of sale on Form 4797, Part III, even if the down payment is small. Adding it to basis on line 12 keeps it from being taxed a second time as payments arrive. Unrecaptured Section 1250 gain is different: it stays in the installment gain and comes out first (Treas. Reg. 1.453-12).
Where does line 26 go?
For a capital asset, to Form 8949 or Schedule D; for business property held more than one year (a rental), to Form 4797, Part I, as Section 1231 gain. Line 25 is for the rare recapture of Sections 1252, 1254 and 1255 (farmland, mineral and conservation property). Report the note's interest separately. If the note is over $5 million at year-end, add the Section 453A interest charge; see Section 453A.
Keep going
- Form 6252 instructions: the rules behind each line.
- Gross profit percentage calculator.
- Real estate capital gains tax calculator: the tax each year.
- Installment sale calculator: seller financing vs a structured sale vs cash.
- IRS: About Form 6252 and Publication 537.
Form 6252 FAQ
Who has to file Form 6252?
Anyone reporting a sale of property on the installment method: a sale at a gain where at least one payment is received after the end of the year of sale. You file it for the year of sale and every later year until the final payment, even in a year you receive nothing. Dealers and sales of inventory and publicly traded stock cannot use it.
What goes on Form 6252 line 12?
Ordinary income recapture from Form 4797, Part III: Section 1245 recapture and Section 1250 recapture of depreciation above straight-line. It is taxed in full in the year of sale even if you received no payment (IRC 453(i)), so it is added to basis to keep it out of the installment gain.
What is line 17 on Form 6252?
The amount by which debt the buyer assumed exceeds your adjusted basis plus selling expenses and recapture. It is added to the contract price and treated as a payment in the year of sale (Treas. Reg. 15a.453-1(b)(3)).
Is interest reported on Form 6252?
No. Stated and imputed interest is ordinary income reported on Schedule B or elsewhere. Lines 21 and 23 are principal only.
How is unrecaptured Section 1250 gain handled on an installment sale?
It is taken out of the installment gain first, year by year, until it is used up (Treas. Reg. 1.453-12), and taxed at up to 25%. Form 6252 itself does not split it out; the Unrecaptured Section 1250 Gain Worksheet in the Schedule D instructions does. This calculator shows the split.