Home Sale Capital Gains Calculator

People also ask

How much tax will I pay when I sell my house?

For most primary-residence sellers: nothing. Your gain is the sale price minus selling costs minus your adjusted basis (purchase price plus documented improvements). If you owned and lived in the home 2 of the last 5 years, up to $250,000 of gain (single) or $500,000 (married filing jointly) is excluded under Section 121. Only gain above the exclusion is taxed: at 0%, 15%, or 20% federal depending on income, plus state tax and depreciation recapture if the home was ever rented.

What is the Section 121 exclusion?

Section 121 lets homeowners exclude up to $250,000 of capital gain on the sale of a primary residence, or $500,000 for married couples filing jointly, when they have owned and used the home as their main residence for at least 2 of the 5 years before the sale. Unlike the old rollover rules, you do not need to buy a replacement home, and you can claim the exclusion again on a future home after two years.

What is the 2-of-5-year rule?

You must have owned the home and used it as your principal residence for at least 24 months during the five years ending on the sale date. The 24 months do not need to be consecutive: two years of occupancy, a move-out, and a sale within three years still qualifies. For the full $500,000 married exclusion, both spouses must meet the use test, though only one needs to meet the ownership test, and neither can have claimed the exclusion within the prior two years.

What counts as a capital improvement to my basis?

Projects that add value, prolong the home's life, or adapt it to new uses: additions, kitchen and bath renovations, a new roof, HVAC, water heater, flooring, landscaping hardscape, a deck, or a finished basement. Repairs and maintenance: repainting, fixing leaks, replacing broken hardware, do not count. Keep receipts: every documented improvement dollar raises your basis and directly shrinks any gain above the exclusion.

What are the 2026 capital gains rates on a home sale?

Gain above the exclusion is taxed as long-term capital gain (assuming more than a year of ownership): 0% up to roughly $49,450 single / $98,900 married filing jointly of taxable income, 15% up to about $545,500 / $613,700, and 20% above that. Large gains can also trigger the 3.8% net investment income tax above $200,000 single / $250,000 MFJ MAGI, and most states tax the gain as ordinary income at rates from 0% to about 13.3%.

Can I get a partial exclusion if I sell before two years?

Yes, if the early sale is due to a qualifying reason: a job relocation of 50 miles or more, health-related moves, or unforeseen circumstances such as divorce, death, or multiple births from one pregnancy. The exclusion is prorated by time: living in the home 12 of the required 24 months earns 50% of the cap, or $125,000 single / $250,000 MFJ. Selling early just because prices rose does not qualify.

I rented out my home before selling. Do I still get the exclusion?

Often yes, with two catches. First, timing: you generally must sell within about three years of moving out so the home still passes the 2-of-5 test. Second, depreciation: every dollar of depreciation claimed (or allowable) during the rental years is recaptured at up to 25% federal, and the Section 121 exclusion never covers it. Rental years before the home became your residence (after 2008) also create "nonqualified use" that reduces the excludable portion.

What is depreciation recapture on a former rental?

If the home was ever a rental, including house-hacking a unit or renting rooms, the depreciation deductions from those years are taxed at up to 25% federal when you sell, separately from the capital gain and outside the exclusion. For example, $30,000 of depreciation claimed while renting generates roughly $7,500 of recapture tax even if Section 121 wipes out the rest of your gain. The IRS applies this to depreciation "allowed or allowable," so skipping the deduction does not avoid the tax.

How is selling a primary residence different from selling an investment property?

A primary residence gets the Section 121 exclusion but cannot use a 1031 exchange; an investment property is the reverse, no exclusion, but a 1031 exchange can defer the entire tax bill by rolling proceeds into replacement property. Investment sales also face depreciation recapture on the full holding period and NIIT more often. If you are selling a rental rather than your home, use the 1031 exchange calculator, which models that comparison side by side.

Do I pay taxes on the sale if I inherited the house?

Inherited homes get a stepped-up basis: your basis becomes the fair market value at the previous owner's death, not what they paid. If you sell soon after inheriting, the gain is usually small or zero regardless of exclusions. If you move in and live there 2 of 5 years, you can add the Section 121 exclusion on top of the stepped-up basis. Inherited property gains are automatically treated as long-term no matter how quickly you sell.

Does my mortgage payoff affect the capital gains calculation?

No. The gain is based on sale price, selling costs, and adjusted basis, the mortgage is irrelevant to the tax math. A seller with a large loan can owe tax on a big gain while walking away with little cash, and a free-and-clear seller with a small gain can pocket a lot tax-free. This calculator's net proceeds figure is before mortgage payoff; subtract your loan balance to estimate the actual check at closing.

How do I report a home sale on my taxes?

If your entire gain is excluded and you did not receive a Form 1099-S, you generally do not need to report the sale at all. If you received a 1099-S, or part of the gain is taxable, report the sale on Form 8949 and Schedule D, claiming the exclusion there. Depreciation recapture from rental years is reported as unrecaptured Section 1250 gain. Keep your closing statements and improvement receipts for at least three years after filing.