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Capital Gains Tax on Property Sales in Texas

When selling your home, you want to know how much you are going to net. One of the important expenses most don’t think about is capital gains tax.  Luckily in Texas there is no income tax, however Uncle Sam is going to want his cut when you sale your house for profit… unless you meet the exemption requirements.


Property Income Tax TexasIs the Sale of Property in Texas Taxable?
Yes, when you sale property in Texas it is treated just like an investment property. If you sell for profit, then anything on top of what you paid for the property is treated as capital gain.If you have had your home for a year or less then it is treated as short-term capital gain. If it’s longer than a year then it will be treated as long-term capital gain.
How much tax will I owe?



When your home is exempt
One of the most common exemptions from capital gains tax involves personal residences. If you meet the requirements, you’re allowed to make up to $250,000 for single taxpayers or $500,000 for joint filers on the sale of your home and not have to pay any capital gains tax on the sale.

Excluding some or all of your capital gains is possible as long as you meet three requirements:

  • You owned the home for a total of at least two years in the five-year period before the sale.
  • You used the home as your primary residence for a total of at least two years in that same five-year period.
  • You haven’t excluded the gain from another home sale in the two-year period before the sale.


Avoid Capital Gains Tax
A great way to defer paying capital gains tax is to do a 1031 exchange which allows you to to exchange the property for one or multiple properties of equal or greater value. There are a few stipulations on how this is done such as how much can be cash, how much has to be a loan and how long you have to find the new properties.  You can usually have all of this setup for less than $800. Please do contact us if you would like to be put in touch with a trusted company.

This does not make your gains tax-free, it is only deferring the capital gains until you decide to pull your money out of the real estate market. Now you may want to do this until you have a capital loss in a year big enough to cancel out the gains.  That is a conversation to be had with your accountant.


Disclaimer: We are not accountants. Consult with your accountant on your personal tax matters for the best advice.

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