REV-1689: PA Schedule D-1 - Calculation of Installment Sale Income (REV-1689) (Revision)

Who files this form

Use PA Schedule D-1 if you elect the installment sale method to report gain from selling real property or tangible personal property. Complete Sections I and II for each tax year you report gain, and use a separate schedule for each sale.

The installment method is not allowed for:

• Losses.
• Sales of intangible personal property.
• Transactions for lending money or providing services.
• Taxpayers using the accrual method of accounting.

For installment sales in the regular and ordinary course of business, such as inventory sales, report the activity on PA Schedule C or F instead.

What you'll need

Have the following information ready:

• Name as shown on your return and applicable taxpayer identification numbers.
• Property description, acquisition date, and sale date.
• Selling price and existing mortgages or other debts the buyer assumes.
• Property cost or other basis, buying expenses, and capital improvements.
• Depreciation or amortization allowed or allowable.
• Sales commissions and other selling expenses.
• Payments received during the tax year and payments reported in prior years from this installment sale.
• Interest income and interest expense for the year on the property sold.

If you acquired the property before June 1, 1971, obtain PA Schedule D-71 (REV-1742) to determine the taxable gain first. The form also directs you to attach that schedule when using the proration method.

How to file

Print or type your entries. Complete Sections I and II for each tax year in which you report installment-sale gain, using a separate PA Schedule D-1 for each sale.

Submit PA Schedule D-1 with your Pennsylvania tax return. Enter the taxable installment gain from Line 19 on PA Schedule D or another appropriate schedule.

The supplied text does not give a mailing address or e-filing instructions.

Common mistakes

• Including interest in the wrong lines. Do not include interest in the selling price on Line 1 or principal payments on Line 14. Report net interest income on Line 18.
• Including new buyer financing on Line 2. Include only existing mortgages or other indebtedness the buyer assumes from the seller, not new mortgages from a bank, the seller, or another source.
• Adding repairs to basis. Add capital improvements, but not repairs.
• Continuing after a zero gain or loss. If Line 9 is zero or less, stop. Report the entire sale on PA Schedule D or another appropriate schedule and submit it with your return.
• Rounding the gain ratio too much. Express Line 12 as a fraction or a decimal carried to at least six places.
• Using federal depreciation without checking Pennsylvania rules. Pennsylvania does not allow federal bonus depreciation. Depreciation or IRC §179 adjustments may be required when federal and Pennsylvania treatment differs.
• Overlooking the election's permanence. An installment sale election is irrevocable.

Questions people ask

What if I do not elect the installment method?

If you cannot or do not elect the installment method, complete PA Schedule D to report the entire gain received from the sale.

What if I received no payments during the tax year?

Enter zero on Line 14. For Line 13, enter the amount from Line 10 only in the year of sale; otherwise, enter zero.

Which prior-year payments belong on Line 16?

Include money and the fair market value of property received and reported in prior years from this sale, but only if the sale was reported to Pennsylvania using the installment method.

How do I report interest on the property sold?

On Line 18, enter the interest received during the year minus the interest expense incurred during the year on the property sold. If expenses exceed income, enter the loss and fill in the loss oval.

Official sources

• https://www.pa.gov/content/dam/copapwp-pagov/en/revenue/documents/formsandpublications/formsforindividuals/pit/documents/rev-1689.pdf