Installment Sale of a Business: the year-by-year path in the example
2026 law · reviewed September 7, 2026
| Year | Principal received | Gain recognized | Recapture | Interest | Federal tax |
|---|---|---|---|---|---|
| Year 1 | $400,000 | $280,000 | $100,000 | $0 | $93,000 |
| Year 2 | $400,000 | $280,000 | $0 | $96,000 | $91,520 |
| Year 3 | $400,000 | $280,000 | $0 | $72,000 | $82,640 |
| Year 4 | $400,000 | $280,000 | $0 | $48,000 | $73,760 |
| Year 5 | $400,000 | $280,000 | $0 | $24,000 | $64,880 |
| Total | $2,000,000 | $1,400,000 | $100,000 | $240,000 | $405,800 |
A $2,000,000 sale, $500,000 basis, $100,000 recapture, $400,000 down, the rest over 4 years at 6%; 20% on gains, 37% ordinary (§ 453(c), (i)).
Educational only, not investment, tax, or legal advice. Results are hypothetical estimates that vary with each use and over time and are not guaranteed accurate or complete. Using this tool creates no client relationship with Considerate Capital, and the site that linked here is not affiliated with it. By using it you agree to the tool terms.