What Tax Considerations Should I Know When Selling in Texas?

What tax considerations should I know when selling in Texas?

When selling a home in Texas, most homeowners don't owe state income tax, but capital gains tax, exemptions, timing, and how the property was used can significantly impact your net proceeds. Understanding the basics — and consulting a licensed tax professional — helps you avoid surprises and plan your sale strategically.

Selling a home is often one of the largest financial transactions you'll ever make. While Texas is known for being tax-friendly, there are still important federal tax considerations that can affect how much money you ultimately keep.

As Kallie Spencer (Ritchey), Broker/Owner at Ritchey Realty, I regularly advise sellers in Keller and across North Texas on what questions to ask and when to bring in a tax professional — not to give tax advice, but to help sellers plan intelligently.

Here's what every Texas home seller should understand before listing.

✅ 1. Texas Has No State Income Tax — But Federal Taxes Still Apply

One of the biggest advantages of selling a home in Texas is simple:

Texas does not have a state income tax.

That means:

• No Texas tax on home sale profits
• No state capital gains tax

However, federal capital gains tax rules still apply, and this is where many sellers need clarity.

✅ 2. What Is Capital Gains Tax on a Home Sale?

Capital gains tax applies to the profit you make when selling a property — not the full sales price.

In simple terms:

Sale price

– Purchase price

– Certain qualifying costs

= Potential capital gain

The IRS may tax that gain unless you qualify for an exclusion.

⚠️ This is where consulting a licensed CPA or tax professional is essential — individual situations vary.

✅ 3. The Primary Residence Capital Gains Exclusion

Many homeowners are eligible for a capital gains exclusion when selling their primary residence.

General IRS guidelines (subject to change):

• Up to $250,000 of gain may be excluded for single filers
• Up to $500,000 of gain may be excluded for married couples filing jointly

To potentially qualify, you generally must have:

• Owned the home for at least two of the last five years, and
• Lived in the home as your primary residence for at least two of the last five years

These two years do not need to be consecutive.

This exclusion is one of the most valuable tax benefits available to homeowners — but eligibility should always be confirmed with a tax professional.

✅ 4. When Capital Gains Tax May Apply

You may owe capital gains tax if:

• The home was a rental or investment property
• You didn't live in the home long enough to qualify for the exclusion
• Your profit exceeds the exclusion threshold
• The home was used for business purposes
• You've claimed the exclusion on another home within a certain timeframe

In Keller and North Texas, this often applies to:

• Rental homes in Heritage or Woodland Springs
• Homes converted to rentals after moving
• Properties held for appreciation

Each scenario has different tax implications — and again, this is where a CPA should be involved early.

✅ 5. Timing Your Sale Can Matter

While real estate decisions shouldn't be driven solely by taxes, timing can play a role.

Examples:

• Selling after meeting the two-year residency requirement
• Coordinating the sale with other income events
• Planning around retirement or job changes
• Considering year-end vs. early-year sales

"Tax planning isn't about avoiding taxes — it's about avoiding surprises."

— Kallie Spencer (Ritchey)

A tax professional can help you determine whether waiting or selling now makes more sense financially.

✅ 6. What Expenses May Reduce Your Taxable Gain

Certain costs related to selling or improving your home may be considered when calculating gain — but documentation matters.

Examples that may be relevant (confirm with your CPA):

• Major home improvements (not routine maintenance)
• Selling costs (commissions, certain fees)
• Capital improvements that add value or extend life

Keeping receipts and records is critical.

Important: Not all repairs or updates qualify. Your tax professional will determine what applies to your situation.

✅ 7. Homestead Exemption and Property Taxes

While the homestead exemption does not directly impact capital gains tax, it does affect:

• Annual property taxes
• Ownership classification
• Buyer timelines

When selling, your homestead exemption typically remains in place until ownership transfers. Buyers will need to reapply after purchase.

This is not a tax liability issue — but it's a common seller question in Keller ISD neighborhoods.

✅ 8. Inherited Homes and Special Situations

If you're selling:

• An inherited home
• A property held in a trust
• A home owned by an estate
• A divorce-related property

…the tax considerations are very different.

These situations often involve:

• Step-up in basis
• Estate rules
• Trust accounting
• Court orders

These sales should always involve a licensed tax professional and, in some cases, an attorney.

✅ 9. Why Sellers Should Talk to a Tax Professional Before Listing

Many sellers wait until closing — and that's often too late to plan effectively.

A quick conversation with a CPA can help you:

• Estimate potential tax exposure
• Confirm eligibility for exclusions
• Decide on optimal timing
• Understand documentation needs
• Avoid costly mistakes

"My role is to help sellers plan the sale. A tax professional's role is to help them keep more of what they earn."

— Kallie Spencer (Ritchey), Broker/Owner at Ritchey Realty

⭐ How I Help Sellers Navigate This Strategically

While I don't give tax advice, I:

• Flag common tax-related questions early
• Encourage proactive planning
• Coordinate timing considerations with your CPA
• Help sellers understand how sale structure impacts net proceeds

With over 600 homes sold, I've seen firsthand how early tax planning can reduce stress and prevent last-minute surprises.

✅ Key Takeaways for Texas Home Sellers

• Texas has no state income tax, but federal taxes still apply
• Many sellers qualify for capital gains exclusions
• Rental, inherited, or investment properties require special care
• Timing and documentation matter
• A licensed tax professional should be part of your selling team

Selling your home should be financially empowering — not confusing.

Ready to Sell Your Texas Home Strategically?

Get expert guidance on planning your sale and understanding what tax questions to ask before you list.

📞 Contact Kallie Spencer (Ritchey), Broker/Owner at Ritchey Realty

📱 Call (682) 788-9060 ✉️ Email Kallie 🌐 Visit Website

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