US Real Estate Capital Gains Tax Overview
When you sell real estate at a profit, the gain is subject to capital gains tax. Long-term gains (property held over 1 year) are taxed at preferential rates of 0%, 15%, or 20% depending on income. Short-term gains are taxed as ordinary income. Your adjusted basis includes the purchase price plus qualifying improvements and selling costs.
The most important tax break for homeowners is the IRC Section 121 exclusion: if the property was 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 gains from taxation. This exclusion can be used once every 2 years.
Frequently Asked Questions
Real estate agent commissions, attorney fees, title insurance, transfer taxes, and home improvements that add value all increase your basis and reduce your taxable gain.
No. For rental property, depreciation previously claimed is recaptured at up to 25%. This calculator shows a simplified estimate for reference only.