Taxes on Selling a House in Massachusetts: What Home Sellers Need to Know

Capital gains tax

You’ve likely heard the term “capital gains tax,” but what is it?

When you sell a home for more than its adjusted cost basis, the profit you make is called a capital gain. To calculate it, subtract your adjusted cost basis, which includes your original purchase price and qualifying capital improvements, along with any eligible selling expenses, from the sale price. The resulting amount is your capital gain, which may be subject to tax depending on your situation. 

Let’s say you bought a home in Massachusetts for $470,000 a few years ago and eventually invested another $30,000 in qualifying upgrades, such as replacing the roof or renovating the kitchen. Then, you sell the property today for $685,000 and incur $40,000 in eligible selling costs, including agent commissions and other qualifying closing expenses.

Your adjusted cost basis would be $500,000 after adding the $30,000 in improvements to your original purchase price. Deducting that amount and the $40,000 in selling expenses from your $685,000 sale price results in a capital gain of $145,000, before any applicable exclusions or other adjustments. Depending on your financial circumstances and eligibility for tax breaks, some or all of that gain may be subject to capital gains tax.

State capital gains tax

Capital gains tax rates differ by state. Some states, like Florida, don’t even have a capital gains tax. Massachusetts’s capital gains tax rate varies based on whether the gain is considered short-term or long-term. The state generally taxes long-term gains at 5% and short-term gains at 8.5%, with an additional 4% on taxable income above $1,107,750 for tax year 2026.

Federal capital gains tax

Capital gains are also classified as “short-term” or “long-term” at the federal level:

• Capital gains are considered short-term when an asset is sold within a year of its purchase. Those gains are lumped into your regular income and taxed according to your tax bracket.
• Capital gains are considered long-term when earned from the sale of an asset after at least a full year of ownership. For a home sale, those gains are taxed at a variable rate, depending on your income.

The 2026 federal capital gains tax brackets determine how much tax you may owe on the taxable profit from selling your home. Knowing which bracket applies to you can help you plan and keep more of your proceeds. Keep in mind that your federal tax bracket is based on your total taxable income, not just the gain from your home sale.

2026 short-term capital gains tax brackets

2026 long-term capital gains tax brackets

It’s possible to have your capital gains excluded at the Federal level, assuming you qualify. The maximum amount of capital gain that can be excluded is $250,000 for single filers, and $500,000 for a married couple that is filing jointly.

According to the IRS Publication 523, you must meet these criteria:

If you don’t fit any of the above criteria, you may still qualify for a partial exclusion. Circumstances such as relocating for a job, managing a health problem, or dealing with the death of a loved one, among others, can qualify you. For more, please refer to IRS Publication 523.

How to report your Massachusetts 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 (Form 1040).
• For your Massachusetts capital gains, use Schedule D.

Transfer tax

Whenever you sell your home and transfer the legal ownership to the buyer, the government charges a tax on this transaction. This is known as a transfer tax, also sometimes called a documentary stamp tax or recordation tax.

Similar to other forms of taxation, these taxes are a way for the government to generate revenue and are an important part of determining your overall profit when selling your home.

The amount owed in transfer taxes when selling your home in Massachusetts is $2.28 per $500 of the total transaction value. So, if your home sells for $750,000, you’d pay about $3,420 in transfer taxes. If your home is in Barnstable County, though, the rate is higher at $2.85 per $500 of the sale price, including the county surtax.

Massachusetts generally requires the person making or signing the deed to pay the deed excise tax, which is typically the seller. The tax is usually paid as part of the closing process, and the seller’s closing costs commonly include this expense.

Property tax

Property tax is a fee homeowners pay based on their property’s assessed value, and it’s usually due every year. The amount you pay can vary quite a bit depending on where you live since each state has its own rules and rates.

According to the Tax Foundation, Massachusetts’s effective property tax rate on owner-occupied housing value is typically 1%. This is a statewide estimate, not a rate everyone pays. But for a $750,000 home, you’d pay roughly about $7,500 per year.

In Massachusetts, property taxes are typically paid in four installments throughout the year, with due dates set by your city or town (often in August, November, February, and May). When you sell your home, your taxes are prorated based on the day of the sale, so you’ll only pay for the days you owned the home during that tax period. Even if the next tax bill isn’t due until after closing, you’ll typically settle your share at closing, and the buyer will cover the taxes for the time they own the property.

The Massachusetts Department of Revenue can provide more information about taxes specific to your city or town.

Inheritance tax

In some states, if you inherit a home, you may owe taxes. Massachusetts, however, is not one of these states. But you’ll be responsible for any property taxes owed on the home. It’s also possible that a lien might exist on the property if the previous owner was not up to date on their taxes, which you would be responsible for.

If you decide to sell an inherited home, a tax rule called the “stepped-up basis” can work in your favor. It means the home’s value for tax purposes is based on its fair market value when the original owner passed away, rather than what they paid. This can help lower your capital gains tax if you sell the home soon after inheriting it. That’s because you generally pay capital gains tax only on the increase in value after you inherited the home, not on the increase that happened while the previous owner had it.

»Learn more: Want to know exactly how much you’ll walk away with from your home sale? Use our Massachusetts closing cost calculator to get a personalized estimate of your selling expenses and see your potential proceeds after closing.

Other selling expenses you might encounter in Massachusetts

Title fees: Title fees typically include a title search and title insurance. Title insurance helps protect buyers and lenders if a problem with a home’s title comes up after the sale. For example, it can cover issues that were missed during the title search, like forged records, undisclosed heirs, unpaid debts, or restrictions tied to the property. Who pays the title insurance can vary by state. In Massachusetts, this typically falls to the buyer, except for parts of Worcester County.

Settlement fees: Also called escrow fees, settlement fees are usually 1% of the home sale value. This lump sum is charged by the title company, escrow company, or attorney handling the closing process. These fees typically cover the costs of preparing final documents, completing the transaction, and distributing payments to the appropriate parties. The exact amount and who pays these fees can vary depending on the agreement between the buyer and seller.

Agent commissions: Historically, sellers paid a total commission of around 5% to 6% of the home’s sale price, which was usually split between the listing agent and the buyer’s agent. But after the National Association of Realtors settlement changed how agent fees are handled, buyers now work directly with their agents to negotiate their own commission costs. For sellers, this typically means paying only their listing agent’s commission, which is often around 2.5% to 3% of the sale price, depending on the agreement.

Real estate withholding: Massachusetts has special rules for real estate sales of $1 million or more. The person handling the closing must file a tax form for these sales, even if the seller doesn’t have to pay any tax upfront. Some sellers, including people who live outside Massachusetts and certain businesses without an ongoing business presence in the state, may need to have part of their sale proceeds set aside for taxes before receiving the rest of their money.

The standard amount withheld is usually 4% of the seller’s share of the total sale price. An extra 4% may apply to the portion of the sale price above the state’s surtax threshold. Some sellers can choose to calculate the withholding based on their estimated profit instead. Certain exceptions also apply, including for qualifying sales of a primary residence.

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How to prepare for Massachusetts real estate taxes

Real estate taxes don’t need to be intimidating, and they don’t need to catch you off guard. There are several ways you can get an idea of what you’ll owe before the time comes to sell your home, and HomeLight is here to help. Here are some final steps to consider:

• Know your home’s value: Use an online automated valuation model (AVM) tool like HomeLight’s free Home Value Estimator. Having a ballpark idea of what your home might be worth can help you calculate the potential capital gains from the home sale.
• Save the right documents: Know which tax documents you will need when selling before doing so. Consult with your tax professional about the federal and state documents needed in Massachusetts and the tax breaks you might qualify for.
• Find a top agent: An experienced real estate agent can guide you through the home sale process. They help you understand your tax burden and maximize 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 real estate agents in your market. From our agent match to innovative programs like Simple Sale and Buy Before You Sell, we have you covered when it comes to selling your home, ensuring every transaction is simple, certain, and satisfying.

Editor’s note: This content is for educational purposes only, not financial, tax, or legal advice. HomeLight recommends consulting an advisor for guidance tailored to your situation.

Writer Joseph Gordon contributed to the original version of this post.

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