What payment schedules can I choose for a structured installment sale?

Hans Goldstein structures installment sales for sellers and works alongside their CPAs. Email hans@goldsteinco.net or call 213-340-2018.

What patterns are available?

Every pattern is a term of years with fixed dates and amounts. Payments do not depend on how long you live, and they are not tied to a market index. The funding is a fixed annuity only.

Can I change the schedule later?

No. You choose it before closing, it is written into the assignment agreement, and it is fixed once the annuity is funded. You cannot speed it up, slow it down, borrow against it or cash it out.

That lock is what protects the deferral. If you could draw the money at will, it would be treated as received under the constructive receipt rule (Treas. Reg. §1.451-2(a)), and the gain would be taxed now. See can I speed up or borrow against the payments? If you might need flexibility, take that cash at closing instead of structuring it.

How does the schedule affect your taxes?

The schedule decides how much gain lands in each year. Under the installment method, every dollar of principal carries the same gross profit ratio (Temp. Treas. Reg. §15a.453-1(b)(2)), so a bigger payment means more gain that year.

Illustrative: you structure $1,200,000 and your gross profit ratio is 60%. Ten level annual payments carry $120,000 of principal and $72,000 of gain each year, plus interest. A single $400,000 lump sum in year five carries $240,000 of gain that year. Same total gain, very different brackets.

Four things to plan around:

• Your brackets. For 2026, married filing jointly, long-term gain is taxed at 0% up to $98,900 of taxable income, 15% up to $613,700 and 20% above (Rev. Proc. 2025-32). Sizing each year's gain to stay under a threshold is the main lever.
• Net investment income tax. The 3.8% tax (IRC §1411) applies above $250,000 MAGI married filing jointly ($200,000 single). Gain and the interest portion both count. Moderate-income sellers can sometimes stay under it; high-income sellers pay it regardless.
• Medicare premiums (IRMAA). Medicare Part B and D surcharges are set from your income two years earlier. A lump-sum year can raise premiums two years later. See IRMAA after a property sale.
• The §453A interest charge. If the face amount of your installment obligations from the year's sales, outstanding at year end, exceeds $5,000,000, §453A(b)(2) charges interest on the deferred tax. A longer or later schedule means more years the charge can apply. See the §453A interest charge.

How do you pick one?

Start with the years you need cash, then fit the gain around your other income.

1. List your expected other income each year: wages, Social Security, required minimum distributions, rental income.
2. Mark any big known expenses and their dates.
3. Have your CPA model a few schedules: level over 10 years, deferred to retirement, and one with a lump sum where you need it.
4. Get insurer quotes on the two or three that work. Pricing differs by pattern, so the payments for each will differ.

Any §1245 recapture is taxed in the year of sale regardless of schedule (IRC §453(i)). Unrecaptured §1250 gain spreads with the payments and comes out first from each payment's gain (Treas. Reg. §1.453-12).

Frequently asked

Q: Can payments start years after closing? A: Yes. A deferred start is common for sellers who are still working. The start date is set before closing and cannot be moved.

Q: Can I get payments for as long as I live? A: No. Structured installment sale payments run for a fixed term with fixed dates. If you die first, the remaining payments go to your beneficiary.

Q: Can I mix monthly payments with a lump sum? A: Yes. Combinations are common. Each piece is priced by the insurer and fixed in the contract.

Q: Can I change my mind after closing? A: No. The schedule is locked once funded. That is what preserves the tax deferral.

What should you read or run next?

• What interest rate does it pay, and how is it set?
• How are structured sale payments taxed?
• Can I speed up or borrow against the payments?
• What happens to the payments when I die?
• IRMAA after a property sale
• Installment sale calculator
• All structured installment sale questions

Who wrote this?