Taxes on Selling a House in Texas: What to Expect
It’s likely you’ve enjoyed living in your Texas home and have been happy that there is no state-level personal income tax. But now the time has come to make a move, and you’re wondering if there are taxes on selling a house in Texas.
In this guide, we’ll explain what to expect and share tips from an expert Texas real estate agent.
To make it easy to follow, we’ve divided this post into seven common questions homeowners ask when selling a house in the Lone Star State.
Editor’s note: This post is for educational purposes and is not intended to be construed as financial or tax advice. HomeLight encourages you to reach out to an advisor.
Taxes on selling a house in Texas
When selling a house in Texas, you’ll be pleasantly surprised to know that you’ll only have a few taxes to consider, and one of them is actually a federal tax. And while the tax burdens may be fewer in Texas, you need to know what to expect so there are no surprises.
“You’ll want to make sure you understand the full tax liabilities when you sell a home,” says Katie Powers, a top San Antonio area real estate agent who sells homes 62% quicker than average agents in her market. “You’ll want to make sure it’s a great decision and that you are prepared to pay taxes for the year that you are selling.”
Let’s take a look at a set of tax questions you might have when selling a house in Texas.
1. Will I pay a capital gains tax in Texas?
Texas does not levy a state capital gains tax, but you may have to pay federal capital gains taxes on profits from selling your home — unless you qualify for an exclusion.
The federal amount you owe depends on several factors, including how long you’ve owned the home and your income level. The good news is, there are exemptions available for your primary residence, which will reduce or eliminate your capital gains tax bill. (We’ll explain this more in the next section.)
Capital gains are the profits made when you sell an appreciable asset, such as your Texas house. For example, if you buy a property for $250,000 and sell it for $450,000, you have a capital gain of $200,000.
On the federal level, these gains can be considered either short-term or long-term.
Short-term capital gains are when you sell an asset (such as a house) within a year of purchasing it. Those gains are included in your ordinary income and taxed according to your tax bracket.
Long-term capital gains are any profits made from the sale of an asset after at least a full year of ownership. For a property sale, those gains are taxed according to the following table.
2024 capital gains tax brackets (long-term capital gains)
Our table below displays the long-term capital gains rates for tax year 2024. Single filers can qualify for the 0% long-term capital gains rate with a taxable income of $47,025 or less. Married couples filing jointly can qualify with an income of $94,050 or less.
Tax rate
Single filers
Married filing jointly
Head of household
20%
$518,901 or more
$583,751 or more
$551,351 or more
15%
$47,026 to $518,900
$94,051 to $583,750
$63,001 to $551,350
0%
$0 to $47,025
$0 to $94,050
$0 to $63,000
Source: IRS.gov (Capital gains table)
Federal capital gains tax exclusion for sellers
Most homeowners in the U.S. can take advantage of the capital gains tax exclusion, a tax break for sellers who meet IRS conditions. This is an exclusion on profits from the sale of your primary home. The maximum amount of capital gain that can be excluded is $250,000 for single filers or $500,000 for a married couple filing jointly.
According to IRS Publication 523, to qualify for the full exclusion amount on a home sale, the following criteria must be met:
The home being sold is your primary residence.
You’ve owned the home for at least two years in the five-year period before selling it.
You’ve lived in the home for at least two years within the five-year period before selling it. The years you’ve lived in it don’t need to be consecutive. Certain exceptions to this rule are made for those who are disabled or those in the military, Foreign Service, intelligence community, or Peace Corps.
You didn’t acquire the home through a like-kind exchange (also known as a section 1031 exchange) within the past five years. This is basically when you swap one investment property for another.
You haven’t claimed the exclusion on another home in the past two years.
You aren’t subject to expatriate tax (a government fee paid by those who renounce their citizenship or take up residency in another country).
Capital gains tax exclusion example
If the sale of your house resulted in a gain of $350,000. A single taxpayer who qualified for the capital gains exclusion would be able to exclude $250,000 of that gain, and would only have to pay taxes on the leftover profit of $100,000. If the same taxpayer was married, the couple would be able to exclude up to $500,000 of the gain. In this case, you and your partner would end up paying no additional taxes on the home sale.
“If it is an investment property, then you’ve got to take into account capital gains,” Powers says. “The big thing is, just check with your CPA.”
But even if you or your home are unable to check off all of the IRS qualifying boxes, you may still be eligible for a partial exclusion of the gain. This can happen if the primary reason for your home sale is a change in workplace location, a medical issue, or an unforeseeable event. For more information on these partial exclusion scenarios, refer to IRS Publication 523.
