Home Sale Capital Gains Tax Estimator
Will you owe federal tax when you sell your Texas home? Most sellers don't — the IRS excludes up to $250,000 of gain ($500,000 married filing jointly) on a primary residence. Texas has no state income tax. Run your numbers.
Your sale
Do you owe tax when you sell your house in Texas?
Usually not. Under IRS Section 121, if you owned and lived in the home as your main residence for at least two of the last five years, you can exclude up to $250,000 of gain — $500,000 for married couples filing jointly. Texas has no state income tax, so there is no state capital gains tax at all. Only the gain above the exclusion is taxed, at long-term capital gains rates of 0%, 15% or 20% depending on your income.
Your gain is smaller than you think
Gain is not sale price minus purchase price. It's the amount realized (price minus selling costs) minus your adjusted basis (purchase price plus closing costs when you bought plus capital improvements like a new roof, remodel, HVAC or pool). Keeping receipts for improvements can cut a taxable gain dramatically, and lower selling costs — such as a $5,999 flat listing fee instead of 3% — reduce it further.
Special situations
If the home was ever a rental, depreciation you claimed is recaptured at up to 25% and rental years after 2008 may reduce the exclusion. Divorce, death of a spouse, military service and job relocations have their own rules. This estimator handles the common case; a CPA should handle the rest.
Frequently asked questions
Is there capital gains tax on home sales in Texas?
There is no Texas state tax. Federal tax may apply only to gain above the $250,000 / $500,000 primary-residence exclusion.
What counts as a capital improvement?
Anything that adds value or extends the home's life: additions, kitchen and bath remodels, roof, HVAC, windows, pool, fence, landscaping projects. Repairs and maintenance don't count.
Can I use the exclusion more than once?
Yes, but not more than once every two years, and you must meet the 2-of-5-year ownership and use tests each time.
Do I report the sale on my tax return?
If your entire gain is excluded and you didn't receive a Form 1099-S, you generally don't have to report it. If you did receive a 1099-S, report it even if no tax is due.
What tax rate applies to gain above the exclusion?
Long-term capital gains rates: 0%, 15% or 20% by income, plus a 3.8% Net Investment Income Tax for higher earners.
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KAT Realty Group is a full-service flat fee real estate service: buyer representation for $4,999 and seller listing for $5,999, serving Austin, Dallas–Fort Worth, Houston, San Antonio and all of Texas. See all calculators or request a consultation.