Updated October 16, 2026. Quick answer: Form 6252 reports a sale under the installment method, and “Generally, an installment sale is a disposition of property where at least one payment is received after the end of the tax year in which the disposition occurs.” The form divides gross profit (line 16) by contract price (line 18) to get a percentage, then applies it to payments received each year. Recapture does not wait: “Any ordinary income recapture under section 1245 or 1250 (including sections 179 and 291) is fully taxable in the year of sale even if no payments were received.”
Related reading on this site: IRS Publication 537.
Schedule D and Schedule E (Form 1040) for 2025, read line by line: Schedule D lines 4 and 5, Schedule D lines 11 and 12 and Schedule D line 19.
Schedule 2 (Form 1040) for 2025, read line by line: Schedule 2 lines 13 to 16.
The shareholder’s Schedule K-1 (Form 1120-S), boxes 13 to 19: Schedule K-1 box 17 codes K to O.
What Form 6252 is for and who cannot use it
The form states its purpose in one line: “Use Form 6252 to report an installment sale under the installment method.” The top of the form adds “Use a separate form for each sale or other disposition of property on the installment method.” The filing runs past the sale year: “File Form 6252 for the year of the disposition and all subsequent years, regardless of whether a payment is received in such year, until and including the year final payment is received or the obligation is disposed of.”
Some sales are outside the method. For losses, “Don’t file Form 6252 for sales that don’t result in a gain, even if you will receive a payment in a tax year after the year of sale.” For listed securities, “Don’t file Form 6252 to report sales during the tax year of stock or securities traded on an established securities market.”
The method is the default, and opting out is a return position. “Don’t file Form 6252 if you elect not to report the sale on the installment method.” “To elect out, report the selling price on a timely filed return (including extensions) on Form 4797, Form 8949, or the Schedule D for your tax return, whichever applies.” A page on electing out of the installment method covers the choice, and Form 4797 and Form 8949 are the other places the sale can land.
Part I: gross profit and contract price
Part I builds two numbers, gross profit on line 16 and contract price on line 18. Here are the lines in the form’s own words:
| Line | Wording on the form |
|---|---|
| 5 | “Selling price including mortgages and other debts.” |
| 6 | “Mortgages, debts, and other liabilities the buyer assumed or took the property subject to” |
| 7 | “Subtract line 6 from line 5” |
| 10 | “Adjusted basis. Subtract line 9 from line 8” |
| 12 | “Income recapture from Form 4797, Part III” |
| 13 | “Add lines 10, 11, and 12” |
| 14 | “Subtract line 13 from line 5.” |
| 15 | “If the property described on line 1 above was your main home, enter the amount of your excluded gain.” |
| 16 | “Gross profit. Subtract line 15 from line 14” |
| 17 | “Subtract line 13 from line 6. If zero or less, enter -0-” |
| 18 | “Contract price. Add line 7 and line 17” |
Part II and a worked illustration
Part II turns the percentage into income each year. Line 22 is “Add lines 20 and 21” and line 24 is “Installment sale income. Multiply line 22 by line 19. This amount cannot be less than zero.”
The percentage is fixed in the year of sale. “Enter the gross profit percentage determined for the year of sale even if you didn’t file Form 6252 for that year.” On format, “Enter it as a decimal rounded to at least 4 digits, and include all zeros (for example, 25% = 0.2500, 35.25% = 0.3525, or 100% = 1.0000).”
The following is an illustration with made-up amounts, not an IRS example. A seller sells land for $300,000, and the buyer assumes a $50,000 mortgage. The seller’s basis is $100,000 with no depreciation, selling costs are $20,000, and there is no recapture. Part I works out this way:
| Step | Amount | Note |
|---|---|---|
| Line 5, selling price | $300,000 | Illustration input |
| Line 6, mortgage the buyer assumes | $50,000 | Illustration input |
| Line 7, line 5 minus line 6 | $250,000 | Computed here: $300,000 minus $50,000 |
| Lines 8 and 10, cost basis with no depreciation | $100,000 | Illustration input |
| Line 11, selling costs | $20,000 | Illustration input |
| Line 13, lines 10 plus 11 plus 12 | $120,000 | Computed here: $100,000 plus $20,000, with nothing on line 12 |
| Line 14, line 5 minus line 13 | $180,000 | Computed here: $300,000 minus $120,000 |
| Line 16, gross profit | $180,000 | Line 15 is zero because the property is not a main home |
| Line 17, line 6 minus line 13 | -0- | Computed here: $50,000 minus $120,000 is below zero |
| Line 18, contract price | $250,000 | Computed here: $250,000 plus zero |
| Line 19, gross profit percentage | 0.7200 | Computed here: $180,000 divided by $250,000 |
Line 17 is zero because the assumed mortgage is less than the seller’s basis plus costs, so the contract price on line 18 is the same $250,000 as line 7. Suppose the buyer pays $50,000 in the year of sale, $100,000 the next year and $100,000 the year after as the final payment. The assumed mortgage is not a payment here: “Generally, don’t include as a payment the buyer’s note, a mortgage, or other debt assumed by the buyer.” Each year’s line 24 is line 22 times the 0.7200 percentage:
| Year | Line 21 payments | Line 24 income | Note |
|---|---|---|---|
| Year of sale | $50,000 | $36,000 | Computed here: $50,000 times 0.7200 |
| Second year | $100,000 | $72,000 | Computed here: $100,000 times 0.7200 |
| Third year, final payment | $100,000 | $72,000 | Computed here: $100,000 times 0.7200 |
| Total | $250,000 | $180,000 | Equals line 16 from the year of sale |
The three years of income, computed as $36,000 plus $72,000 plus $72,000, equal the $180,000 of gross profit, which is the check that the percentage was applied correctly. The instructions also say what counts as a payment: “However, a note or other debt that is payable on demand or readily tradable on an established securities market is considered a payment.”
Related party sales and recapture
Part III is for sales to relatives and related entities. “Note: If the property was sold to a related party, also complete Part III for the year of sale and 2 years after the year of sale unless you received the final payment during the tax year.” The definition reads “For this purpose, a related party includes your spouse, child, grandchild, parent, or sibling; or a related corporation, S corporation, partnership, estate, or trust.”
The special rule applies when the related buyer resells. “Under this rule, treat part or all of the amount the related party realized (or the fair market value (FMV) if the disposed property isn’t sold or exchanged) from the second disposition as if you received it from the first disposition at the time of the second disposition.” “This rule doesn’t apply if any of the conditions listed on line 29 are met.” The conditions on the form are:
| Box | Condition as printed |
|---|---|
| 29a | “The second disposition was more than 2 years after the first disposition (other than dispositions of marketable securities).” |
| 29b | “The first disposition was a sale or exchange of stock to the issuing corporation.” |
| 29c | “The second disposition was an involuntary conversion and the threat of conversion occurred after the first disposition.” |
| 29d | “The second disposition occurred after the death of the original seller or buyer.” |
| 29e | “It can be established to the satisfaction of the IRS that tax avoidance wasn’t a principal purpose for either of the dispositions.” |
Recapture is the part that surprises sellers. “Any ordinary income recapture under section 1245 or 1250 (including sections 179 and 291) is fully taxable in the year of sale even if no payments were received.” “To figure the recapture amount, complete Form 4797, Part III.” Line 25 covers a different set of recapture, ordinary income recapture on section 1252, 1254, or 1255 property, and the instructions say not to enter ordinary income from a section 179 expense deduction there. On line 25, “Don’t enter on line 25 more than the amount shown on line 24.” “Any excess must be reported in future years on Form 6252 up to the taxable part of the installment sale until all of the recapture has been reported.” The live page on installment sale recapture in the year of sale works through that case, and this page does not repeat it.
Where the income goes, interest and other special rules
Line 26 is routed by property type. “For trade or business property held more than 1 year, enter this amount on Form 4797, line 4.” “For capital assets, enter this amount on Schedule D as a short- or long-term gain on the lines identified as from Form 6252.” See Schedule D for the receiving form.
Which parts to complete each year and which revision applies
The instructions set the minimum: “Complete lines 1 through 4, Part I, and Part II.” “Complete these requirements for Form 6252 for each year of the installment agreement, including the year of final payment, even if a payment wasn’t received during the year.”
Publication 537 defines the term the form rests on: “An installment sale is a sale of property where you receive at least one payment after the tax year of the sale.” It adds a limit: “You can’t use the installment method to report a loss.”
The edition read for this page is Form 6252 for 2026, a single file that includes the form and its instructions, as archived for this kit. Check the revision printed on the form you are filing, because a different year can change the line references and the dates the instructions mention. The form is marked “Form 6252 (2026) Created 6/16/26” and carries “Cat. No. 13601R”. On later changes it says “For the latest information about developments related to Form 6252 and its instructions, such as legislation enacted after they were published, go to www.irs.gov/Form6252.”
Common mistakes
- Treating an assumed mortgage as a payment received in the year of sale. The instructions say “Generally, don’t include as a payment the buyer’s note, a mortgage, or other debt assumed by the buyer.”
- Waiting for payments to report recapture. The instructions say “Any ordinary income recapture under section 1245 or 1250 (including sections 179 and 291) is fully taxable in the year of sale even if no payments were received.”
- Skipping the form in a year with no payment. The instructions say “Complete these requirements for Form 6252 for each year of the installment agreement, including the year of final payment, even if a payment wasn’t received during the year.”
Related: installment sale recapture in the year of sale, electing out of the installment method, Form 4797, and Schedule D.
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- Form 6252 (2026) with instructions, Installment Sale Income: https://www.irs.gov/pub/irs-pdf/f6252.pdf
- Publication 537 (2025), Installment Sales: https://www.irs.gov/pub/irs-pdf/p537.pdf
Read from the IRS documents linked above on October 16, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.