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 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.

For example, you bought your Pennsylvania home for $165,000 years ago, spent $30,000 on capital improvements, and then sold it today for $310,000 after paying $20,000 in selling expenses. Your capital gain would be $95,000 before any applicable exclusions or adjustments. This amount may be subject to capital gains tax.

State capital gains tax

Pennsylvania has a flat personal income tax rate of 3.07%, but don’t assume you’ll automatically owe that much tax on the profit from selling your home. If you’re selling the house you live in, you may qualify for a state tax break that lets you keep the profit without paying Pennsylvania income tax on it. To qualify, you generally must meet these requirements:

• You owned the home for at least two years: You must have owned it for a total of at least two years during the five years before the sale.
• You lived in the home for at least two years: It must have been your main home for at least two years during that same five-year period. Simply keeping your belongings there doesn’t count.
• You haven’t recently claimed the tax break on another home: Generally, you can’t have sold another main home and claimed the exemption within the previous two years. Exceptions may apply if you had to sell because of unexpected circumstances, such as a job change or health issue.

If your home meets these rules, the profit from its sale is generally exempt from Pennsylvania income tax. However, if you’re selling a rental property, an investment property, or a home that doesn’t meet the requirements, some or all of your profit may be taxable at the state’s 3.07% rate. Pennsylvania also doesn’t use different tax rates for short-term and long-term gains from selling property, so how long you’ve owned the property doesn’t change the tax rate.

Federal capital gains tax

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

• Capital gains are considered short-term when an asset is sold within a year of its purchase. They 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. They 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 profit from your home sale. Knowing which bracket applies to you can help you plan and keep more of your proceeds. But note that your federal tax bracket is based on your total taxable income, not just the profit from selling your home.

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 moving for a job, managing a health problem, or dealing with a death in the family, 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, you generally don’t have to pay state income tax on the profit from selling your main home if it qualifies for the exemption. You also don’t need to file a separate form just to report an exempt home sale. However, if part of your home was used for business or rental purposes and doesn’t qualify for the exemption, you may need to report the profit on PA Schedule D and include the PA Schedule 19 worksheet with your tax return.

Transfer tax

Aside from capital gains tax, Pennsylvania home sellers may also need to account for transfer taxes when selling a home. These are fees charged when property ownership is transferred from one person to another. Transfer tax, also known as documentary stamp tax, recordation tax, or grantor’s tax, is usually based on the home’s sale price.

In Pennsylvania, the state charges a 1% realty transfer tax on a home’s sale price. For example, if you sell your home for $315,000, the state transfer tax would be $3,150. Some local governments charge an additional transfer tax, and who pays these taxes depends on local laws and the agreement between the buyer and seller.

Property tax

Property tax is an annual fee homeowners pay based on the assessed value of their property. Like other taxes, the amount you pay can vary depending on where you live and how much your home is worth.

In Pennsylvania, the average property tax rate for owner-occupied homes is around 1.26%. Local governments handle property taxes, so your tax bill and payment deadline depend on where you live. There’s no universal deadline for property taxes across the state. To find out how much you owe and when to pay, check with your local tax office or visit the Pennsylvania Department of Revenue.

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 choose to sell the inherited home, you may benefit from something called a “stepped-up basis.” This means the home’s value for tax purposes is usually based on its fair market value when the previous owner passed away, rather than the price they originally paid for it. If you sell the home for a price close to that value, you may owe less in capital gains tax because you’re only taxed on the profit above that amount.

»Learn more: Want to know exactly how much you’ll walk away with from your home sale? Use our Pennsylvania 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 Pennsylvania

Title fees: Title fees typically include a title search and title insurance. Title insurance helps protect both the buyer and lender from potential problems with a home’s title. These issues could include things like forged documents, a previously unknown will, or restrictions on the deed that weren’t discovered during the title search. Who pays the title insurance can vary by state. In Pennsylvania, the buyer usually covers this cost, but the final decision is negotiable and depends on what both parties agree to.

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.

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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’ll 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.

Editor’s note: This post 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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