Capital Gains Tax
Calculator.
Estimate your capital gains tax when selling your home —
based on your sale price, cost basis, filing status,
and the Section 121 exclusion.
Estimated capital gains tax
$0
| Sale price | $450,000 |
| Adjusted cost basis | $329,000 |
| Selling costs | $27,000 |
| Capital gain | $94,000 |
| Section 121 exclusion | -$250,000 |
| Taxable gain | $0 |
| Tax rate | 0% |
| Estimated tax | $0 |
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Lower commissions = lower selling costs. Even if your taxable gain increases slightly, your net proceeds are thousands higher.
Understanding capital gains tax on real estate.
When you sell your home for more than you paid, the profit is called a capital gain. Whether you owe tax on that gain depends on how long you owned the property, whether it was your primary residence, and your income level. Most homeowners pay $0 in capital gains tax thanks to the Section 121 exclusion.
Short-term vs. long-term capital gains
If you owned the property for one year or less, the gain is short-term and taxed at your ordinary income tax rate (10-37%). If you owned it for more than one year, it qualifies for long-term capital gains rates: 0%, 15%, or 20% depending on your taxable income and filing status. For most home sales, long-term rates apply. Understanding how your mortgage amortizes helps you track your equity over time.
The Section 121 exclusion
The IRS Section 121 exclusion is the most powerful tax benefit for homeowners. If you've lived in the home as your primary residence for at least 2 of the last 5 years, you can exclude up to $250,000 (single) or $500,000 (married filing jointly) of capital gains from federal income tax. On a $450,000 sale with a $300,000 purchase price, a single filer with $150,000 in gains would owe $0 in tax.
What counts as cost basis?
Your cost basis is the original purchase price plus capital improvements plus buying closing costs. Capital improvements are renovations that add lasting value — a kitchen remodel, new roof, room addition, or new HVAC system. Routine repairs (painting, fixing a leak) do not increase your cost basis.
Depreciation recapture
If you rented out the property and claimed depreciation deductions, the IRS "recaptures" that depreciation when you sell — taxing it at a flat 25% rate. This applies to investment and rental properties, not primary residences. If you converted a rental to your primary residence, partial recapture may still apply. Consult a tax professional for complex situations.
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Resources.
Everything you need to understand taxes when selling your home.
