What taxes do you pay on a home sale?
Some people — though not many — will need to pay capital gains taxes upon selling their home


Given that your home is likely your largest asset, the prospect of turning a profit when you go to sell it is understandably exciting. That is, until you remember the reality of taxes.
There is both bad news and good news here. The bad: It is possible to pay capital gains taxes when you sell your home. The good: Not many people end up paying them due to the capital gains tax exclusion on home sales. This concern may eventually become a moot point altogether, as President Trump has proposed "ending capital gains taxes on home sales to boost the housing market," said CNBC. But for now, if you are planning to sell, it is a good idea to know what to expect when it comes to the potential for home sale taxes.
When do you have to pay taxes on a home sale?
If you sell your home for more than you paid for it, you may owe capital gains tax on that difference or on your profit from the sale. However, for the tax to apply, that profit must exceed a certain threshold. Specifically, "if you are single and you lived in your house for two of the five years directly before the sale, the first $250,000 of any profit you make on the home is tax-free," said SmartAsset, a personal finance blog. That exemption increases to $500,000 if you are married and filing a joint return.
The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
If you do end up owing taxes, you will only pay them on the amount by which your home sale profits exceed the threshold. Your profit is not just the difference between the purchase price and the sale price — you will also take into consideration "how much you’ve spent on any additions or home improvements" as well as "any fees you paid, such as closing costs and realtor fees," said SmartAsset.
How much do you pay in taxes when selling a house?
A number of factors come into play when determining the amount of taxes you will pay on a home sale.
For starters, it matters how long you have owned the house. If you sell after owning the home for a year or less, then "short-term capital gains tax rates may apply," which are "equal to your ordinary income tax rate, also known as your income tax bracket," said NerdWallet. But "if you owned the home for longer than a year before selling, long-term capital gains tax rates may apply," which are "much more forgiving," ranging from 0% to 20%, depending on your income tax bracket.
As of 2025, "you are not subject to capital gains taxes if your taxable income is $47,025 or less ($94,050 if married and filing jointly)," said Bankrate. If your income is "between $47,026 and $518,900 as a single filer, or between $94,051 and $583,750 if married and filing jointly, you would pay 15%," while those whose incomes exceed those thresholds would pay a capital gains tax rate of 20%.
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Can you avoid taxes on a home sale?
The way most people skip paying taxes on a profitable home sale is the capital gains tax exclusion on home sales. Thanks to this rule, "most homeowners are exempt from needing to pay," said Investopedia.
Qualifying for this exemption requires that you have lived in the home you are selling for at least two years and that it has served as your primary residence for at least two of the past five years. You also cannot have used the exemption already within the last two years.
Becca Stanek has worked as an editor and writer in the personal finance space since 2017. She previously served as a deputy editor and later a managing editor overseeing investing and savings content at LendingTree and as an editor at the financial startup SmartAsset, where she focused on retirement- and financial-adviser-related content. Before that, Becca was a staff writer at The Week, primarily contributing to Speed Reads.
-
The tiny Caribbean island sitting on a digital 'goldmine'
Under The Radar Anguilla's country-code domain name is raking in millions from a surprise windfall
-
September 7 editorial cartoons
Cartoons Sunday’s political cartoons include stressing about Powerball, and a busy FBI schedule
-
Nvidia: unstoppable force, or powering down?
Talking Point Sales of firm's AI-powering chips have surged above market expectations –but China is the elephant in the room
-
How much does it cost to move? Here's how to budget and save.
the explainer Factors like move distance and the weight of your furnishings can affect the total cost — but there are several ways to economize
-
When does a personal loan make sense?
the explainer Personal loans tend to be more flexible and versatile than home, auto or student loans
-
Should you downsize for retirement? Here's what to consider.
The Explainer Moving to a smaller place may seem easier, but there are also some real benefits to staying put
-
What to do if you want to move but don't want to give up your low mortgage rate
the explainer 30-year mortgage rates are currently averaging 7% — and homeowners who secured rates closer to 3% during the pandemic are reluctant to sell their homes
-
Is hands-off investing the way to go?
The Explainer In many cases, your money might be better off left alone
-
What to know before turning to AI for financial advice
the explainer It can help you crunch the numbers — but it might also pocket your data
-
Should you add your child to your credit card?
The Explainer You can make them an authorized user on your account in order to help them build credit
-
How will the new Repayment Assistance Plan for student loans work?
the explainer The Repayment Assistance Plan (RAP) will replace existing income-driven repayment plans