Taxes on Selling a House in Pennsylvania

Capital gains tax

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

When you sell a “capital asset,” such as a piece of real estate, that is not used for a business, any profits the sale yields are considered capital gains. Capital assets most commonly include things like your home or vehicle, but can also include stocks, bonds, or art.

A capital gains tax is a tax levied on any capital gains earned during a tax year. For example, if you purchased your Pennsylvania home for $295,000 and sold it a few years later for $395,000, you have earned a capital gain of $100,000, which would be taxed.

Capital gains tax rates differ by state. Some states, like Florida, don’t even have a capital gains tax. In Pennsylvania, the tax rate for capital gains is a flat 3.07%. This flat rate applies to capital gains just like regular income and doesn’t change based on how long you owned the asset or your income level.

Meanwhile, at the federal level, capital gains are classified as “short-term” or “long-term”.

2026 capital gains tax brackets

The 2026 capital gains tax brackets determine the rate applied to any taxable gain from your home sale. Understanding where you fall can help you plan and protect more of your proceeds.

2026 short-term capital gains tax brackets

2026 long-term capital gains tax brackets

It’s also 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 moving for a job, managing a health problem, or having to sell the property of a parent who passed away, among others, can qualify you. For more, please refer to IRS Publication 523.

How to report your Pennsylvania 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 Pennsylvania capital gains, use PA Schedule D-I.

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, depending on the state. 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.

In Pennsylvania, there’s a 1% transfer tax on the price of the home when it’s sold. So, if your home sells for $295,000, you’d pay about $2,950 in transfer taxes. Typically, both the buyer and seller share this tax, though they can agree on a different split.

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Property tax

Property tax is a charge levied on real estate based on its assessed value, usually yearly. Like most tax-related charges, property taxes fluctuate depending on the state. 

According to the Tax Foundation, Pennsylvania’s effective property tax rate on owner-occupied housing value is typically 1.19%. State taxes are paid by the calendar year, due on April 15. 

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

Inheritance tax

In Pennsylvania, if you inherit property, you may have to pay inheritance tax. Direct descendants and lineal heirs pay 4.5% of the property value, siblings pay 12%, and all other heirs pay 15%. Meanwhile, transfers to a surviving spouse or from a child 21 or younger to a parent aren’t taxed at all

If you decide to sell the inherited home, the concept of a “stepped-up basis” is key. The stepped-up basis means the home’s cost basis for tax purposes is set at its fair market value on the date you inherited it, not what the original owner paid. This can significantly reduce capital gains tax if you sell the home soon after inheriting it. Capital gains tax is only applied to the portion of the profit above that stepped-up value.

Other selling expenses you might encounter in Pennsylvania

Title fees: Title fees typically include a title search and title insurance. Title insurance is designed to protect both the lender and the buyer of property against any issues with a home’s title, such as forgeries, an undiscovered will, or deed restrictions, that could arise during a title search.

The cost is usually paid by the buyer at closing, though the seller can agree to cover the owner’s policy as part of the sale. Who pays is negotiable between the buyer and seller, so it’s important to clarify in the sales agreement.

Settlement fees: This is usually 1% of the home sale value. A lump sum, sometimes called escrow fees, is issued by the title company, escrow company, or attorney facilitating the closing of the transaction. These fees will usually cover the costs involved in the final paperwork and the distribution of fees. For example, the title fees and who pays for this vary, but they can be split between both parties.

Agent commissions: Historically, when a property changed hands, a commission rate of 5%-6% was paid by the seller and typically split between the listing agent and the buyer’s agent. A percentage of this was then given to the respective brokerages. 

However, a landmark settlement by the National Association of Realtors (NAR) shifted the rules, giving buyers more control to negotiate agent fees directly. Now, buyers can work with their agents to decide exactly what they’ll pay, but sellers are still responsible for covering their listing agent’s commission.

How to prepare for Pennsylvania 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 what tax documents you will need to sell before doing so. Consult with your tax professional about the federal and state documents needed in Pennsylvania 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, 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 tool 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.  

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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.