How Much Tax Do You Pay When Selling a House?

When considering the expenses that come with selling a house, homeowners often focus on the listing price and the cost of improvements. However, the sales process may require tax payments, and expenses can add up quickly. 

We often address tax issues when purchasing properties in Cincinnati, Ohio, and Northern Kentucky at The Kind Home Buyer. Before putting your property on the market, review our guide to learn about tax implications and exclusions for home sales. 

Tax Implications for Homeowners Who List Their Properties for Sale

If your goal in selling your home is to ensure its profitability, you need to understand how the sale can affect your tax obligations. How much tax do you pay when selling a house?

Through the federal government’s primary residence exclusion, single tax filers can exclude up to $250,000 in capital gains when filing their taxes, and married couples can exclude up to $500,000. Capital gains taxes refer to the difference between a home’s purchase price and its selling price. In other words, the IRS will tax amounts outside those limits for joint and single filers as capital gains income.

Your profits from selling your house can be less than you expect if the sale generates taxable profit. Get an idea of gains or losses for a sale by calculating the adjusted cost basis, or the amount you’ve invested in the house, and capital improvements that have boosted the property’s value.

How To Qualify for Tax Exclusions

Not all home sales require tax payments. If you own the house you want to sell, live in it for at least two of the five years before the sale date as your primary residence, and didn’t exclude gains from another home sale in the last two years, you can exclude gains from the sale of your home. 

You may meet tax exemption eligibility requirements for a reduced exclusion. If so, you could treat a portion of your profits as tax-free even if you don’t meet the two-out-of-five-years requirement. You may qualify for a reduced exclusion if the house sells before you can meet the requirements due to the following reasons:

• Health changes
• Employment changes
• Unforeseen issues, including divorce and multiple births in a single pregnancy

Having an exclusion doesn’t mean you can directly exclude a portion of your profits. Instead, it reduces the $250,000/$500,000 tax exclusion. In other words, you may exclude less than $250,000 as a single filer if you only resided on the property for a year.

Ready To Sell Your House? Turn to The Kind Home Buyer

Answering questions like “How much tax do you pay when selling a house?” may seem overwhelming as a homeowner. However, you can streamline the process by choosing a cash home sale with The Kind Home Buyer. 

We have years of experience buying and selling residential properties throughout Cincinnati, Ohio, and Northern Kentucky for fair cash prices. Our specialists are knowledgeable about every aspect of as-is home sales, including primary residence exclusions and home-sale reporting requirements. 

Review our FAQs online or call The Kind Home Buyer at (513) 951-8863 to get your free offer.