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.
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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%.
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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.
