Maryland Installment Sale vs. Lump Sum Tax Calculator

Estimate Federal and Maryland state tax savings by structuring a business stock sale with seller financing instead of a lump-sum payout.

For Discussion Purposes Only — Not Legal or Tax Advice

This calculator is a preliminary analytical tool for general educational and discussion purposes only. All results are estimates based on the inputs provided and simplified modeling assumptions. This tool does not constitute legal, tax, accounting, or investment advice. Tax laws change frequently; consult a qualified CPA, tax attorney, or financial advisor before making any decisions. All Maryland and federal tax figures should be independently verified for your specific transaction.

This calculator does not include real estate transactional taxes that may apply to any real property component of the deal — such as Maryland state recordation tax, state transfer tax (0.5%), county/local transfer taxes, or mortgage recordation taxes. These closing costs vary by county and should be evaluated separately with qualified real estate counsel.

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About This Calculator

Who this tool is for and three ways to use it
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Who Should Use This Calculator

This calculator helps business owners, founders, and shareholders who are preparing for a potential sale, negotiating a Letter of Intent (LOI), or evaluating deal structures with buyers.

The calculator estimates the potential federal and Maryland state tax impact of selling company stock in a single closing payment versus structuring the sale over time through seller financing or installment payments. By comparing both scenarios side by side, the calculator illustrates how spreading gain recognition across multiple tax years may reduce immediate tax exposure, improve after-tax cash flow, and create flexibility during deal negotiations.

Three Ways Sellers Can Use This Calculator

  • Create Listing Offer Structure to Meet a Seller's Goals. Evaluate how spreading income over several years may impact overall tax liability.
  • Negotiation Leverage. Understand whether seller financing could create tax deferral opportunities while helping bridge valuation gaps with buyers.
  • Planning. Facilitate discussions with tax advisors, accountants, attorneys, and financial planners.

Deal Inputs

Configure the sale and note terms — click i for details on any field
Purchase Price
$
Total price the buyer pays for the stock
Seller Closing Costs
$
Broker, legal, etc.
Your Adjusted Basis
$
What you paid for the stock
Depreciation Recapture
$
Usually $0 in a stock sale
Down Payment at Close
$
Seller Note Principal
$
Auto-syncs with purchase price minus down payment
Note Term (years)
Note Interest Rate (%)
%

Your Tax Profile

Customizes federal & Maryland tax rates for your specific situation — click i for details on any field
Other Federal AGI
$
Other income besides this sale
Filing Status
Your Maryland County
Federal Ordinary Rate (%)
%
Marginal rate on interest income
After-Tax Reinvestment Rate (%)
%
What net proceeds earn elsewhere
Active business (no NIIT on gain)
Apply §453A interest charge if note > $5M
Manually override calculated tax rates
Your Calculated Tax Rates * assumes pass-through (e.g., partnership) taxation
Based on your AGI, filing status, and Maryland county

Results Summary

Wealth comparison at end of note term

Cash at Closing — Year by Year

Full price received in Year 0; net proceeds reinvested thereafter
Year Cash Received Tax Paid Net Received Reinvest. Return Cumulative

Seller-Financed Installment Sale — Year by Year

Down payment plus annual note payments; gain spread under IRC §453
Year Principal Interest Tax Net Received Note Balance Cumulative

Export Results

Download a CSV of both scenarios or print the page

Assumptions & Formulas

Modeling notes and what is intentionally not included
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  • Stock sale benefit: Depreciation taken inside the corporation does not flow through to the selling shareholder. The seller is selling a single capital asset — stock. Recapture defaults to $0 unless the user indicates otherwise.
  • Gross profit ratio: (Capital gain) ÷ (Contract price). Each principal payment is multiplied by this ratio to determine the recognized gain in the year of receipt.
  • Federal LTCG stacking: Long-term capital gain is taxed in the bracket above the seller's other ordinary income. The cash-sale scenario typically pushes the gain into the 20% bracket; the installment scenario may keep more of it at 15%.
  • NIIT (3.8%): Applied only when the active-business toggle is off and the seller's MAGI exceeds the threshold ($250K joint / $200K single).
  • Maryland tax: Maryland treats capital gains as ordinary income at the state level. State brackets reflect 2025 law including the new 6.25% and 6.5% top brackets. Local county tax applies as a flat rate.
  • Maryland 2% surtax: Applied on net capital gains when federal AGI exceeds $350,000 (TY 2025 Budget Reconciliation and Financing Act).
  • §453A interest: If installment obligations outstanding at year-end exceed $5M, interest on deferred tax applies at the §6621 underpayment rate on the portion above $5M.
  • Not modeled: Buyer default risk, §453(e) related-party resale acceleration, contingent-payment regimes, AFR / imputed interest, state differences for non-MD residents, and any §1202 QSBS exclusion for qualifying C-corp stock.