Seller Series – Episode 9: Taxes & Capital Gains – What Sellers Should Know

Nikia Evans
Jul 18
2 min read

What to Expect During Tax Season After Selling Your Home

You’ve sold your home—congratulations! 🎉 But as tax season approaches, you might be wondering: “Will I owe taxes on the profit I made?”In this episode of the Seller Series, we’re breaking down what you need to know about capital gains tax, exemptions, and how selling your home can impact your tax return.

💡 What Is Capital Gains Tax?

Capital gains tax is what you may owe on the profit (gain) from selling your home. It’s calculated as:

Sale Price – Purchase Price – Eligible Selling Costs = Capital Gain

So if you bought your home for $200,000, sold it for $350,000, and had $25,000 in selling costs (like commissions and repairs), your gain would be $125,000.

🏡 But Here's the Good News: Most Homeowners Are Exempt!

Thanks to the Section 121 Exclusion, most sellers do not have to pay capital gains tax—if they meet the following:

✅ Lived in the home for 2 of the last 5 years before the sale✅ The home was your primary residence✅ The gain is under $250,000 (or $500,000 if married filing jointly)

👉 If you meet these requirements, you may not owe any capital gains tax at all!

📋 Common Deductible Selling Expenses

Even if you do owe taxes, the IRS allows you to subtract certain expenses from your gain, such as:

Real estate agent commissions
Title and escrow fees
Advertising and staging costs
Home repairs or improvements made to sell the home

These can help reduce your taxable gain and lower your tax bill.

🧮 What If It Wasn’t Your Primary Residence?

If the property was a rental or investment property, different tax rules apply. You may owe capital gains tax without exemption, and depreciation recapture might come into play.It’s a good idea to consult with a tax professional or CPA to understand how it applies to your situation.

📅 When to Report the Sale

You’ll typically report your home sale on your tax return for the year in which the home was sold. The title company will send you a Form 1099-S if the transaction is reportable.

Even if you’re exempt, it’s still a good idea to keep detailed records of: