Yes — that’s possible, but it needs to be structured correctly under U.S. tax law.
If a house seller doesn’t want to receive the full proceeds in one year (and trigger a large capital gain all at once), they can sometimes use an installment sale:
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Installment Sale Basics (IRC §453)
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Seller agrees to receive payments over two or more years.
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Each year, the seller reports a portion of the gain (not the entire sales price) based on how much principal is received.
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This can spread out capital gains tax liability, potentially keeping the seller in a lower tax bracket.
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Example
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Suppose seller sells a rental property with $200,000 gain.
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Buyer pays $100,000 at closing (Year 1), and $100,000 one year later (Year 2).
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Seller reports roughly half the gain each year, instead of all $200,000 in Year 1.
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Cautions
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If the property has a mortgage, special rules apply.
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Installment sales are not allowed for sales of publicly traded stock or inventory, but are allowed for real estate.
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Interest must usually be charged on deferred payments (or the IRS may impute interest).
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The deal has to be structured in writing in the sale contract before closing.
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So yes, a house seller can get paid half now and half later, but it has to be done as a formal installment sale.
Do you want me to walk you through how the IRS calculates the taxable portion each year in such a setup?
