Taxes on Selling a House in California: What to Expect
- Updated
- Originally published
- 12 min read
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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 Editor
Sam 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.
When you’re getting ready to sell your California home, it’s easy to focus on pricing, prep, and timing, but taxes deserve a spot on your radar as well. The rules can feel a little murky, especially with different factors at play. Understanding taxes when selling a home in California can help you avoid surprises and keep more of your profit. 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.
So getting a grasp of the various taxes on selling a house can feel overwhelming.
That’s why we’ve created a detailed list outlining the different taxes you might encounter. This guide breaks down the ins and outs of paying taxes on selling a house in California, so you can move through the process with a lot more confidence and a lot less stress.
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 appreciating asset, such as a house. To calculate your capital gain, subtract your adjusted cost basis and eligible selling expenses from your home’s sale proceeds. Your adjusted cost basis generally includes the original purchase price and the cost of qualifying capital improvements, along with certain acquisition costs and other allowable adjustments.
For example, if you buy a home for $200,000, spend $50,000 on qualifying capital improvements, pay $20,000 in eligible selling expenses, and sell it for $500,000, your capital gain would be $230,000 before any applicable exclusions or additional adjustments. Now, you might be asking, exactly 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. The amount you owe depends on factors such as your taxable gain, income, how long you owned the property, and whether you qualify for a home sale exclusion.
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%. An additional 1% Behavioral Health Services Tax applies to taxable income over $1 million, bringing the highest rate to 13.3%.
| Tax Rate | Single Filers | Married Filing Jointly | Head of Household |
| 1% | $0 to $11,456 | $0 to $22,912 | $0 to $22,927 |
| 2% | $11,457 to $27,157 | $22,913 to $54,314 | $22,928 to $54,316 |
| 4% | $27,158 to $42,861 | $54,315 to $85,722 | $54,317 to $70,018 |
| 6% | $42,862 to $59,498 | $85,723 to $118,996 | $70,019 to $86,654 |
| 8% | $59,499 to $75,197 | $118,997 to $150,394 | $86,655 to $102,356 |
| 9.30% | $75,198 to $384,109 | $150,395 to $768,218 | $102,357 to $522,385 |
| 10.30% | $384,110 to $460,927 | $768,219 to $921,854 | $522,386 to $626,864 |
| 11.30% | $460,928 to $768,213 | $921,855 to $1,536,426 | $626,865 to $1,044,771 |
| 12.30% | $768,214 or more | $1,536,427 or more | $1,044,772 or more |
These are tax rates that apply to different portions of your California taxable income, not a flat rate on your entire capital gain. How much you’ll actually owe from selling your home depends on your other income, filing status, and any tax exclusions you qualify for.
Federal capital gains tax
Meanwhile, on the federal level, gains can be considered either short-term or long-term:
- Short-term capital gains: These are gains on assets held for one year or less. They’re generally taxed at ordinary income tax rates.
- Long-term capital gains: These are gains on assets held for more than one year. They may qualify for the federal long-term capital gains tax rates.
Short-term capital gains are generally taxed at the same rate as your ordinary income. The federal income tax has seven tax rates in 2026: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
| Tax Rate | Single Filers | Married Filing Jointly | Head of Household |
| 10% | $0 to $12,400 | $0 to $24,800 | $0 to $17,700 |
| 12% | $12,401 to $50,400 | $24,801 to $100,800 | $17,701 to $67,450 |
| 22% | $50,401 to $105,700 | $100,801 to $211,400 | $67,451 to $105,700 |
| 24% | $105,701 to $201,775 | $211,401 to $403,550 | $105,701 to $201,750 |
| 32% | $201,776 to $256,225 | $403,551 to $512,450 | $201,751 to $256,200 |
| 35% | $256,226 to $640,600 | $512,451 to $768,700 | $256,201 to $640,600 |
| 37% | $640,601 or more | $768,701 or more | $640,601 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 $49,450 | $0 to $98,900 | $0 to $66,200 |
| 15% | $49,451 to $545,500 | $98,901 to $613,700 | $66,201 to $579,600 |
| 20% | $545,501 or higher | $613,701 or higher | Over $579,600 |
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, 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, such as a death. 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 using the U.S. Individual Income Tax Return (IRS Form 1040) and Capital Gains and Losses, Schedule D (IRS Form 1040), when required.
If your home sale qualifies for the full federal home sale exclusion, you generally don’t need to report the sale on your federal return if the entire gain is excluded. However, you may still need to report it if you receive Form 1099-S or another reporting requirement applies.
For your California capital gains, file the California Capital Gain or Loss Schedule D (540), when applicable. California’s reporting requirements can differ from federal rules, particularly when the state and federal tax treatment of your home sale differs. If you want to learn more 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. During that time, they spent $100,000 on qualifying home improvements, including a kitchen remodel and landscaping upgrades. They later sold the property for $1,250,000. Assuming they qualify for the full home sale exclusion, file jointly, and have no other adjustments to their cost basis or selling expenses, here’s how their capital gains taxes might be calculated.
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 $98,901 and $613,700)
- Federal tax due: $100,000 × 15% = $15,000
California state capital gains tax:
- Exclusion for married filing jointly: $500,000
- Taxable gain: $600,000 − $500,000 = $100,000
- California marginal tax rate: 9.3%
- California tax due: $100,000 × 9.3% = $9,300
Summary of taxes due:
- Total capital gain: $600,000
- Taxable gain after the home sale exclusion: $100,000
- Federal tax due: $15,000
- California tax due: $9,300
- Combined illustrative tax: $24,300
Under these assumptions, John and Jane’s combined federal and California taxes attributable to the home sale could be approximately $24,300. But note that this example is just an estimate and assumes John and Jane qualify for the full home sale exclusion.
Their actual tax bill could be higher or lower depending on their other income, tax brackets, and individual circumstances. If you’re selling your own home, it’s a good idea to check with a tax professional to get a clearer picture of what you might owe.
Transfer taxes
A transfer tax is a fee that state or local governments charge when a property changes owners. The amount is usually based on the home’s sale price or fair market value. The tax is typically paid at closing as part of the process of transferring the property’s ownership.
California’s documentary transfer tax varies by location. State law generally sets the county transfer tax at 55 cents for every $500 of property value. Many cities also impose their own transfer taxes, which can increase the total amount due. The applicable rates depend on the property’s location and, in some cities, its sale price.
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 (county tax) and $2.75 per $1,000 (city tax) | $1,925 |
| San Francisco | $3.40 per $500
(more than $250,000 but less than $1,000,000) |
$3,400 |
| Los Angeles | 55 cents per $500 (county tax) and $2.25 per $500 (city tax) | $2,800 |
*The transfer tax rate in some cities is tiered so that the greater the purchase price or market value, the greater the tax.
In California, sellers usually pay the transfer tax when selling a home, but local rules can vary, and buyers and sellers can negotiate who covers the cost. Before closing, check with your escrow or title professional to confirm the city and county requirements.
Don’t let California transfer tax catch you off guard when selling your home. Use the California Transfer Tax Calculator to estimate what you may owe and get a clearer picture of your closing costs before you sell.
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.
At closing, property taxes are typically prorated between the buyer and seller according to the terms of the purchase agreement. The seller remains responsible for their share of property taxes through the applicable closing date, while the buyer generally assumes responsibility for the period after the sale.
For example, if Jim and Susie sell their Sacramento home in December, the buyer may pay the second installment due in the spring, but the closing statement would typically account for the seller’s share of property taxes through closing.
Aird recalls that property taxes were part of the closing costs when he purchased his California home, even though the next payment wasn’t due for several months.
“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.”
Find out how property taxes could affect your home sale. Try our easy-to-use California Property Tax Calculator to estimate what you may owe and plan for a smoother selling experience.
Inheritance tax
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. When you inherit a property, its tax basis is generally reset to its fair market value on the previous owner’s date of death, though some exceptions apply.
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.
»Learn more: Want to know exactly how much you’ll walk away with from your home sale? Use our California Closing Cost Calculator to get a personalized estimate of your selling expenses and see your potential proceeds after closing.
Other selling expenses to anticipate in California
Title fees: These consist of title insurance and a title search. Title insurance protects you against problems with a home’s title, such as illegal deeds, undiscovered wills, or forged documents.
In Northern California, it’s 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 average real estate commission rate in California has generally been around 5% to 6% of the home’s sale price, with the total often split between the seller’s agent and the buyer’s agent. Sellers traditionally often paid both agents’ commissions, although all commissions have always been negotiable.
However, the settlement reached by the National Association of Realtors (NAR) brought changes to how agent compensation is negotiated and communicated. Under the new rules, buyers working with agents covered by the rules generally must enter into a written agreement with their agent before touring a home. The agreement specifies the agent’s compensation, which is negotiable.
As a result, sellers may choose to pay only their listing agent’s commission, which can be around 2% to 3% of the sale price, depending on the agreement. However, some sellers may also offer to cover some or all of the buyer’s agent compensation to make their home more appealing to prospective buyers.
Real estate withholding: When you sell real estate in California, a portion of your sale proceeds may be withheld and sent to the California Franchise Tax Board (FTB) as a prepayment toward your state income tax liability. This withholding helps ensure that any California tax due on the sale is paid.
Depending on the transaction and the seller’s eligibility, withholding may be calculated using a percentage of the amount realized or an alternative method based on the property’s estimated gain. Certain transactions qualify for exemptions or other special treatment.
Sellers generally use California Form 593, Real Estate Withholding Statement, to report withholding, calculate the applicable amount, or claim an exemption. Keep in mind that real estate withholding is not necessarily the final amount of tax you owe.
The amount withheld is credited toward your California income tax liability when you file your tax return. You may owe additional tax or qualify for a refund, depending on your actual taxable gain, available exclusions, and other tax circumstances.
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 knowledgeable professional can help you understand the tax implications and make the most of your profits. 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 tax is based on the profit you make when you sell an asset, such as a home, after subtracting your adjusted cost basis and any eligible selling expenses. California taxes most capital gains as regular income, so the amount you owe depends on your total taxable income and tax bracket.
You may also owe federal capital gains taxes, though you could qualify for an exclusion if you meet certain requirements, such as the home sale exclusion for a primary residence. Your final tax bill depends on your income, filing status, and any deductions or exclusions you qualify for. 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. This generally applies to qualifying investment or business property, not a home used solely as a personal residence.
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’s 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, you still pay capital gains taxes after age 65. The IRS doesn’t give you a special exemption just because you’ve reached retirement age. Your capital gains tax generally depends on your income, the type of asset you sold, and how long you owned it. That said, certain tax breaks and deductions may help reduce what you owe, so it’s worth looking at your specific situation.
Editor’s note: This post is for educational purposes only. Reach out to an advisor for professional advice.
Writer Joseph Gordon contributed to the original version of this post.
Header Image Source: (Shen Pan / Unsplash)
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