Buyer agent sent an email to see if we are willing to take a large downpayment (almost 80% of purchase price) and then to do seller financing, installment payments on the remaining 20%.

This is our primary residence and we have lived here for 2.5 years so we are eligible for tax free capital gains.

My question is, if we do this deal, I assume we would get the $175,000 tax free, but what about the installment payments? Would those be tax free as well (outside of the interest the buyer would be paying)? Or would we have to pay capital gains on every payment the buyer makes?

Sounds like it would be a short term, just a few months of payments to cover the other 20%

Can't find anything online, every article I read talks about paying capital gains on the installment payments, but none of them mention the primary residence capital gains tax exemption.

Thanks!