Taxes on Selling a House in California: What to Expect
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Max Efrein, Contributing AuthorClose
Max Efrein Contributing AuthorMax Efrein is a journalist who has covered a wide array of topics, including tracking real estate trends, for both traditional newspapers and online media. He also picked up some firsthand home building experience while significantly expanding and renovating his house to accommodate his growing family.
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Sam Dadofalza, Associate EditorClose
Sam Dadofalza Associate EditorSam Dadofalza is an associate editor at HomeLight, where she crafts insightful stories to guide homebuyers and sellers through the intricacies of real estate transactions. She has previously contributed to digital marketing firms and online business publications, honing her skills in creating engaging and informative content.
Though California is often regarded as a high-tax state, its real estate-related taxes are more middle-of-the-road.
“The perception here is that state income taxes are high, but just on the real estate taxes themselves, they’re pretty comparable to the rest of the country,” says Craig Aird, a top trusts and estate attorney in Greater Los Angeles who specializes in estate planning, tax, and immigration.
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Some of California’s real estate taxes vary throughout the state, as do the expectations on who pays certain portions of a real estate transaction.
Getting a grasp of the various taxes on selling a house in the Golden State can feel overwhelming.
That’s why we’ve created a detailed list outlining the different taxes you might encounter. Our guide is designed to simplify and clarify the various aspects of paying taxes on selling a house in California, ensuring you navigate this journey with ease.
Capital gains tax
If you profit from the sale of a home in California, then you may owe some capital gains tax unless you qualify for an exclusion, which we’ll address in the chart below.
Capital gains are the profits you make when you sell an appreciable asset, such as a house. For example, if you buy a home for $200,000 and sell it for $500,000, you have a capital gain of $300,000. So you might be asking, how much capital gains tax will I pay if I sell my house in California?
In the Golden State, capital gains are taxed by both the state and federal governments.
California state capital gains tax
On the state level, California’s Franchise Tax Board (FTB) taxes all capital gains as regular income. Depending on your tax bracket, the tax can be anywhere from 1% to 12.3%.
| Tax Rate | Single Filers | Married Filing Jointly | Head of Household |
| 1% | $0 to $10,756 | $0 to $21,512 | $0 to $21,527 |
| 2% | $10,757 to $25,499 | $21,513 to $50,998 | $21,528 to $51,000 |
| 4% | $25,500 to $40,425 | $50,999 to $80,490 | $51,001 to $65,744 |
| 6% | $40,246 to $55,866 | $80,491 to $111,732 | $65,745 to $81,364 |
| 8% | $55,867 to $70,606 | $111,733 to $141,212 | $81,365 to $96,107 |
| 9.30% | $70,607 to $360,659 | $141,213 to $721,318 | $96,108 to $490,493 |
| 10.30% | $360,660 to $432,787 | $721,319 to $865,574 | $490,494 to $588,593 |
| 11.30% | $432,788 to $721,314 | $865,575 to $1,442,628 | $588,593 to $980,987 |
| 12.30% | $721,315 or more | $1,442,629 or more | $980,988 or more |
Federal capital gains tax
Meanwhile, on the federal level, gains can be considered either short-term or long-term:
- Short-term capital gains refer to profits earned when you sell an asset within a year of purchasing it. Those gains are included in your ordinary income and taxed according to your tax bracket.
- Long-term capital gains are any profits made from the sale of an asset after at least a full year of ownership.
Short-term capital gains are generally taxed at the same rate as your ordinary income. The federal income tax has seven tax rates in 2025: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
| Tax Rate | Single Filers | Married Filing Jointly | Head of Household |
| 10% | $0 to $11,925 | $0 to $23,850 | $0 to $17,000 |
| 12% | $11,926 to $48,475 | $23,851 to $96,950 | $17,001 to $64,850 |
| 22% | $48,476 to $103,350 | $96,951 to $206,700 | $64,851 to $103,350 |
| 24% | $103,351 to $197,300 | $206,701 to $394,600 | $103,351 to $197,300 |
| 32% | $197,301 to $250,525 | $394,601 to $501,050 | $197,301 to $250,500 |
| 35% | $250,526 to $626,350 | $501,051 to $751,600 | $250,501 to $626,350 |
| 37% | $626,351 or more | $751,601 or more | $626,351 or more |
Meanwhile, for long-term capital gains, these are the tax brackets:
| Tax Rate | Single Filers | Married Filing Jointly | Head of Household |
| 0% | $0 to $48,350 | $0 to $96,700 | $0 to $64,750 |
| 15% | $48,351 to $533,400 | $96,701 to $600,050 | $64,751 to $566,700 |
| 20% | $533,401 or more | $600,051 or more | $566,701 or more |
Both the IRS and FTB provide a capital gains tax break for home sellers who meet certain conditions. The maximum amount of capital gain that can be excluded is $250,000 for single filers or $500,000 for a married couple filing jointly.
To qualify for the full exclusion amount, according to IRS Publication 523, the following criteria must be met:
- You’re selling the home as your primary residence.
- You’ve owned the home for at least two years in the five years before selling it.
- You’ve lived in the home for at least two years within the five years before selling it. The years you’ve lived in it don’t need to be consecutive. Certain exceptions to this rule are made for those who are disabled or those in the military, intelligence community, Foreign Service, or Peace Corps.
- You didn’t acquire the home through a like-kind exchange (also known as a section 1031 exchange) within the past five years. This is basically when you swap one investment property for another.
- You haven’t claimed the exclusion on another home in the past two years.
- You aren’t subject to expatriate tax (a government fee paid by those who renounce their citizenship or take up residency in another country).
If you don’t quite check all of these boxes, you may still qualify for a partial exclusion of gain. This can happen if the main reason for your home sale is a change in workplace location, a health issue, or an unforeseeable event. For details on such circumstances, refer to IRS Publication 523.
How to report your California capital gains taxes
For your federal return, report your capital gains and losses by using the U.S. Individual Income Tax Return (IRS Form 1040) and Capital Gains and Losses, Schedule D (IRS Form 1040). For your California capital gains, file the California Capital Gain or Loss Schedule D (540). But if you’re curious about how to avoid California capital gains tax, refer to this guide.
Sample computation of capital gains taxes
Let’s say John and Jane bought their California home for $550,000 five years ago. Over the years, they made $100,000 worth of improvements, including a kitchen remodel and landscaping upgrades. After some time, they decided to sell the home for $1,250,000.
Overview:
- Purchase price: $550,000
- Home improvements: $100,000
- Sale price: $1,250,000
- Capital gain: $600,000
Federal capital gains tax:
- Exclusion for married filing jointly: $500,000
- Taxable gain: $600,000 – $500,000 = $100,000
- Federal tax rate: 15% (for taxable income between $96,701 and $600,050)
- Federal tax Due: $100,000 × 15% = $15,000
California state capital gains tax:
- Capital gain: $600,000
- California tax rate: 9.3% (for taxable income between $141,213 and $721,318)
- California tax due: $600,000 × 9.3% = $55,800
Summary of taxes due:
- Capital gain: $600,000
- Federal tax due: $15,000
- California tax due: $55,800
- Total tax due: $70,800
John and Jane would owe $70,800 in combined federal and California state capital gains taxes on the sale of their home.
Transfer taxes
A transfer tax is a fee charged by state or local governments whenever real estate changes ownership. The fee is usually based on the property’s sale price or fair market value and is paid at closing as part of the deed transfer process.
California’s documentary transfer tax varies depending on the location within the state. However, the law permits general law counties and cities to charge 55 cents per $500 of property value or the amount paid ($1.10 per $1,000).
This amount can only be increased by locations that have adopted a charter and, therefore, have supreme authority over municipal affairs. Of California’s 482 cities, 126 have charters.
Here are some examples of what the documentary transfer tax looks like in a few of California’s largest cities:
| Location | Transfer tax rate on a $500,000 home* | Transfer tax paid on a $500,000 home |
| San Diego | 55 cents per $500 | $550 |
| Sacramento | 55 cents per $500 | $550 |
| San Francisco | $3.40 per $500 (more than $250,000 but less than $1,000,000) | $3,400 |
| Los Angeles | $2.25 per $500 | $2,250 |
*The transfer tax rate in some cities is tiered so that the greater the purchase price or market value, the greater the tax.
When transferring a home in California, the seller usually pays the tax, but this can be a point of negotiation during the transaction. If left unpaid by the time the sale goes through escrow, then the payment responsibility automatically falls on the buyer.
Property taxes
Property tax is a charge imposed on real estate based on the property’s assessed value. Under Proposition 13, California sets a base property tax rate of 1% of a home’s assessed value. In practice, most homeowners pay less than 1% of their home’s current market value, because the assessed value used to calculate taxes is often significantly lower, particularly for long-term owners.
Annual property taxes in California have two payment stubs. They can be paid simultaneously or in two installments. The first installment is due on November 1 and becomes delinquent on December 10. Meanwhile, the second installment is due on February 1 and becomes delinquent on April 10.
Curious how much you’ll pay in California property taxes? Use our easy-to-use property tax calculator to get an accurate estimate in seconds and plan your budget with confidence.
Once a home is sold, the seller is no longer responsible for its property taxes.
For example, if the fictional Jim and Susie pay the first installment in November and then sell their Sacramento home in December, it is now up to the buyers to cover the second installment due in the spring.
Aird says he experienced a scenario like this firsthand as the buyer of a California home a few years ago.
“Part of the closing cost was paying into an escrow for that next property tax payment that was due in a few months,” Aird says. “It was our responsibility as the buyer.”
What about selling an inherited home in California?
For starters, there are no estate or inheritance taxes in California. So you don’t owe state taxes just for inheriting a property. As the heir, however, you do take on any debts attached to the property, such as an outstanding mortgage.
When selling an inherited home, many of the same considerations apply as they do to selling any California property. Where things differ the most is with capital gains.
Fortunately for heirs, the values of inherited assets are adjusted by what’s called a step-up in basis, Aird says. This means that no matter how much a home has appreciated since it was originally purchased, a decedent’s heirs are not responsible for paying the taxes on those historical gains if they choose to sell the home. Rather, the property automatically converts to the current fair market value.
If the heirs choose to immediately sell that property for the assessed fair market value, then there are no gains. However, if they sell the property for more than the fair market value or choose to hold onto the property for a while before selling, and its value continues to appreciate during that time, then those are considered taxable gains.
Other selling expenses to anticipate in California
Title fees: These consist of title insurance and a title search. Title insurance is a contractual obligation to protect against any issues with a home’s title, such as illegal deeds, undiscovered wills, or forgeries.
In Northern California, it is customary for the buyer to pay for the title insurance, but the opposite is usually the case in Southern California. It’s not uncommon for the parties to negotiate over this item or split the cost, which can range between 0.5% and 1% of the sale value.
A title search, which costs between $100 and $250, can be paid by either the seller or the buyer and is done to prove that the seller is the rightful owner of the property and that there are no outstanding claims or judgments.
Settlement fees: Amounting to about 1% of the home sale value, this lump sum (also known as escrow fees) is issued by the title company, escrow company, or attorney facilitating the closing of the transaction. The payment is designed to cover all that’s involved in handling the final paperwork and distributing funds to the appropriate parties. As with title fees, this can be paid by either the buyer or seller, but is often split between both parties.
Agent commissions: For years, the agent commission fee in California has been hovering at 5% to 6% of the home’s sale price, split between the seller’s agent and the buyer’s agent. The seller usually paid the fee.
However, the historic settlement reached by the National Association of Realtors (NAR) reshaped how commissions are handled in real estate transactions. Under the new rules, buyers now negotiate commissions directly with their agents, rather than relying on sellers to cover them.
This change reduces sellers’ fees to around 2% to 3%. Despite this change in rules, some sellers choose to cover the buyer’s agent as a tactic to attract buyers and secure a sale.
Ways to prepare for real estate taxes
Real estate taxes don’t need to be a surprise or intimidating. There are some simple steps to take that can help you prepare for what’s to come if you decide to sell a home in California.
- Know your home’s value: Use an online automated valuation model (AVM) tool like HomeLight’s free Home Value Estimator to have a ballpark idea of what your home might be worth. This can help you calculate the potential capital gains from the home sale.
- Save the right documents: Know what tax documents you will need if you purchase or sell a home. Consult with your tax advisor about the federal and state documents required to file in California and the tax breaks that might be available for your selling situation.
- Find a top agent: Partner with an experienced real estate agent who can guide you through the home sale process. A qualified agent can help you understand the tax ramifications and ensure a favorable outcome by maximizing your profit. Our data shows that the top 5% of real estate agents across the U.S. sell homes for 10% more than the average real estate agent.
HomeLight makes it easy to find top-performing real estate agents in your market. We account for factors like the real estate agent’s sale-to-list-price ratio and how it aligns with local price trends so that you can partner with top agents who will put more cash in your wallet when you close.
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FAQs about taxes on selling a house in California
The taxes you owe depend on factors like how much you’ll net from the sale, how long you owned the home, and whether it was your primary residence. You may be subject to federal capital gains tax, California state capital gains tax, and other local fees. Consult a tax advisor and ask how much do you pay the IRS when you sell a house.
In California, capital gains from the sale of a house are taxed by both the state and federal governments. The state tax rate varies from 1% to 13.3% based on your tax bracket.
The federal tax rate depends on whether the gains are short-term (taxed as ordinary income) or long-term (based on the tax bracket). If you need an estimate of your taxes on selling a house in California, calculators online are available for easy computation.
You can minimize or avoid capital gains tax by using the home sale exclusion, which allows individuals to exclude up to $250,000 of profit ($500,000 for married couples) if they lived in the home for at least two of the past five years. A 1031 exchange may also help defer taxes if reinvesting in another property.
In addition to capital gains tax, sellers in California may need to pay transfer taxes, which vary by location. Property taxes are prorated, and sellers are responsible for their portion of the taxes until the sale closes. Other expenses to anticipate include title fees, settlement fees, and potential negotiations over who pays for certain items.
It is highly recommended to consult a tax professional or advisor familiar with California tax laws when selling a house. They can provide personalized guidance based on your specific situation, help you understand tax implications, and ensure compliance with state and federal tax requirements.
Yes, age does not exempt you from capital gains tax. However, if you’re interested in how to avoid taxes on selling a house in California, maximize the home sale tax exclusion, making sure that you satisfy its requirements.
Editor’s note: This post is for educational purposes only. Reach out to an advisor for professional advice.
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