Tax Implications of Selling Your Home in Texas
When selling a home in Texas, sellers benefit from the fact that Texas does not impose a state capital gains tax on property sales. However, sellers are still responsible for federal capital gains tax, which is levied on the profit made from selling the property if it exceeds certain thresholds.
Federal Capital Gains Tax Rates
Federal capital gains tax rates depend on:
- How long you owned the home
- Your income level and tax filing status
Long-term capital gains tax applies if you owned the property for more than one year, with rates of 0%, 15%, or 20% based on taxable income brackets for 2024 and 2025. For example, in 2025, single filers with taxable income up to $48,350 pay 0% on long-term gains, incomes from $48,351 to $533,400 are taxed at 15%, and incomes over $533,401 at 20%.
Short-term capital gains tax applies if you owned the asset for one year or less; gains are taxed as ordinary income at rates up to 37% depending on your income bracket.
Primary Residence Exclusion
Texas sellers can benefit from the home sale exclusion, exempting up to $250,000 in capital gains for single filers or $500,000 for married couples filing jointly, provided:
- The home was your primary residence for at least 2 of the last 5 years before the sale.
- You have not claimed this exclusion on another home sale within the past two years.
This exclusion often eliminates capital gains tax liability for many Texans selling their primary home.
Other Tax Considerations in Texas
- Texas does not charge state capital gains tax, allowing sellers to keep more compared to states with additional state taxes.
- Other taxes to consider may include transfer taxes or inheritance taxes, but Texas has no state transfer tax on real estate sales.
- Proper tax planning with professionals is recommended to navigate federal obligations and potential strategies, such as 1031 exchanges for investment properties to defer gains.
Summary
| State Capital Gains Tax | None in Texas |
| Federal Capital Gains Tax | 0%, 15%, or 20% long-term rates based on income and filing status |
| Short-Term Gains Tax | Taxed as ordinary income up to 37% |
| Primary Residence Exclusion | Up to $250k (single), $500k (married) if owned and lived in home 2 of last 5 years |
| Other Taxes | No Texas transfer tax, but consider other potential taxes |
By understanding these rules, Texas sellers can plan their sale and tax strategy to maximize net proceeds and comply with federal tax laws.
Selden Tual
Rogers Healy and Associates Real Estate
512.944.3121