Taxes on Selling a House in Texas: What to Expect

1. Will I pay a capital gains tax in Texas?

Texas doesn’t charge a state capital gains tax, but that doesn’t necessarily mean you’re off the hook. You may still owe federal capital gains taxes on the profit from selling your home if you don’t qualify for a tax break. How much you owe depends on factors such as how long you’ve owned the home and your income.

So, how do you figure out your capital gain? It’s the profit you make when you sell an asset, like a house, for more than its adjusted cost basis. To calculate it, subtract your adjusted cost basis and eligible selling expenses from your home’s sale price. Your adjusted cost basis generally includes what you paid for the home, the cost of qualifying improvements, and certain other allowable expenses and adjustments.

For instance, suppose you purchased a home in Texas for $150,000 a few years ago, invested $50,000 in eligible home improvements over the years, and incurred $20,000 in qualifying selling costs. If you eventually sold the property for $360,000, your capital gain would be $140,000 before applying any eligible exclusions or other adjustments.

On the federal level, these 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.

For a property sale, these gains are taxed according to the following table.

2026 short-term and long-term capital gains tax brackets

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%.

Meanwhile, for long-term capital gains, these are the tax brackets:

These rates are based on your taxable income, not just the profit from your home sale. The long-term capital gains rates generally apply to eligible gains after any applicable exclusion, and other taxes may apply depending on your income and how you used the property.

Federal capital gains tax exclusion for sellers

Most homeowners in the U.S. can take advantage of the capital gains tax exclusion, a tax break for sellers who meet IRS conditions. This is an exclusion on profits from the sale of your primary home. 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.

For federal taxes, report your capital gains and losses on the Individual Income Tax Return (IRS Form 1040) and Capital Gains and Losses, Schedule D (Form 1040), when required. If your Texas home sale qualifies for the full federal home sale exclusion, you generally don’t have to report it if the entire gain is excluded. However, you may still need to report the sale if you receive Form 1099-S or another IRS reporting rule applies.

Capital gains tax exclusion example

Let’s say Jane and John bought their home in Plano years ago for $170,000 and recently sold it for $520,000. For simplicity, let’s assume their gain is $350,000 after accounting for eligible selling expenses and their adjusted tax basis.

If they meet the IRS requirements for the home-sale capital gains exclusion and qualify for the full exclusion as a married couple filing jointly, they can exclude up to $500,000 in profit. Since their $350,000 gain falls within that limit, they wouldn’t owe federal capital gains tax on the sale.

If Jane and John were unmarried co-owners filing as single taxpayers, each would generally be limited to an exclusion of up to $250,000, provided they meet the applicable eligibility requirements. The amount each could exclude would depend on how the home is owned and how the gain is allocated between them.

“If it is an investment property, then you’ve got to take into account capital gains,” Powers says. “The big thing is, just check with your CPA.”

If you don’t meet all the IRS requirements for the full exclusion, you may still qualify for a partial exclusion. This may apply when you sell primarily because of a qualifying change in workplace location, a health-related circumstance, or an unforeseeable event, such as the death of a qualifying individual. For more information about these situations, refer to IRS Publication 523.

Keep in mind that any gain left over after applying an eligible exclusion may be taxable. The amount of federal tax you owe depends on factors such as your total taxable income and the applicable tax rates.

2. Does Texas charge a transfer tax?

Here’s more good news for home sellers: Texas is one of only a few states in the country that does not charge a transfer tax. This means if you’re selling your Texas home, you won’t have this added expense.

In many states, home sellers or buyers must budget for this tax, which is sometimes labeled a stamp tax, deed tax, or mortgage registry tax. These taxes are charged when there is a transfer of ownership. In general, they are calculated as a percentage of the sale price.

3. Does Texas charge a statewide property tax?

Texas doesn’t have a state-level property tax, but local governments do collect property taxes to pay for services such as schools, roads, police, and fire protection. That means your property tax bill will depend on where you live and the local tax rates that apply to your home.

Powers says Texas home sellers should plan for property taxes when preparing to close a sale. “That’s really the main tax you have to plan for. Most people have an escrow account, so it’s already accounted for, but a lot of people don’t. So, you’ve got to be aware that we pay property taxes in Texas.”

Texas homeowners pay an average effective property tax rate of about 1.40%, though rates vary by location. For a home priced at the state’s median of $341,800, that works out to roughly $4,785 a year in property taxes at the average rate.

Property taxes are generally paid in arrears, meaning taxes are paid after the period they cover. When you sell your home, property taxes are typically prorated at closing based on how long you owned the property during the tax year. Your share is usually reflected on the closing statement, though the final tax bill may be calculated or paid later.

You may qualify for property tax exemptions that can lower your bill. The amount you save depends on the exemption you qualify for and the tax rates in your area.

Powers points out that homeowners may qualify for a homestead exemption on their primary residence, as examined by the appraisal district, while people who are 65 or older may qualify for additional tax relief. Disabled veterans may also qualify for exemptions, with eligible veterans who have a 100% disability rating generally able to receive a full exemption on their residence homestead.

These benefits aren’t the same for everyone, so it’s worth checking which exemptions apply to your situation.

4. Does Texas have an estate or inheritance tax?

Texas does not have an estate tax or inheritance tax. However, you will still need to adhere to federal estate tax laws. The federal estate tax, which is a tax on the transfer of a person’s assets after they pass away, applies to estates that exceed a certain value threshold, which is adjusted periodically for inflation.

For 2026, this exemption limit is $15 million per individual. If an estate’s value is above that limit, taxes may be owed on the amount exceeding the exemption.

Texas doesn’t charge a state estate tax or inheritance tax, but federal estate taxes may still apply to larger estates. The federal estate tax applies to the transfer of someone’s assets after they die. For 2026, the federal estate tax exemption is $15 million per person.

This means an estate generally won’t owe federal estate tax if its taxable value falls below the available exemption after allowable deductions and adjustments for certain gifts made during the person’s lifetime. If the taxable amount goes over that limit, federal estate tax may be due on the excess.

Even if no tax is owed, the estate may still need to file a federal estate tax return. For example, an executor may need to file a return to transfer a deceased spouse’s unused exemption to the surviving spouse, allowing them to use it later.

Another tax benefit for Texas homeowners: the state doesn’t charge gift tax. But here again, you’ll need to manage any federal-level gift taxes and exemptions. For 2026, the federal annual gift tax exclusion is $19,000 per recipient, which can be relevant if you’re gifting real estate or funds toward a property.

If the value of the gifted property or money exceeds that amount, it may count against your lifetime gift tax exemption or require you to file a gift tax return. Keeping accurate records is essential to avoid surprises when transferring real estate as a gift.

5. What tax mistakes can I avoid in Texas?

“I think the biggest tax mistake homeowners make is never filing their homestead exemption,” Powers says. “That’s the biggest one, and the most frustrating for me. It doesn’t benefit them when they’re selling, but it just means all the years that they were living in that home, they were overpaying for taxes for no reason.”

To avoid capital gains tax surprises, Powers advises sellers to make certain they know their exact homeownership dates. For example, if you sell your home just shy of the two-year mark, it can have significant tax implications.

Another Texas tax pitfall to avoid is throwing away receipts or records for home improvements. Keeping track of qualifying upgrades and renovations can help increase your home’s adjusted cost basis, which may reduce the capital gains tax you owe when you sell. Just remember that routine repairs and maintenance generally don’t count.

A Top Texas Agent Can Help Reduce Your Costs

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6. What other selling expenses will I face in Texas?

When selling a house in Texas, there are some additional expenses to consider beyond property and capital gains taxes. These costs can impact your total net proceeds. Here are some expenses you can expect when selling your Texas home:

Title insurance and title search fees: In Texas, title insurance premiums are regulated by the state and depend on the policy amount. The premium generally includes title search and examination services, while other closing or escrow fees may be charged separately. The buyer and seller can negotiate who pays for the owner’s title policy.

Settlement fees: These traditional fees are usually about 1.5% of the home sale price. They cover the services provided by the title company, escrow company, or attorney who may be overseeing the sale at closing. These are sometimes called escrow costs, typically split between the buyer and seller.

Agent commissions: Texas home sellers have historically paid around 5% to 6% of the sale price in combined real estate commissions, typically split between the agents representing the buyer and seller. Sellers commonly paid both agents, though commission rates have always been open to negotiation.

After the National Association of Realtors (NAR) settlement, buyers working with agents must sign a written agreement spelling out the agent’s pay before touring a home. As a result, sellers might pay only their own listing agent, with fees often falling around 2% to 3% of the sale price. Some sellers may still offer to cover part or all of the buyer’s agent fees to help attract more interested buyers.

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

7. How can I prepare for real estate taxes in Texas?

The taxes you’ll need to pay from a Texas home sale don’t need to be a surprise or make you feel anxious. Here are a few things you can do to be more prepared:

• Determine your home’s value: Use an online automated valuation model (AVM) like HomeLight’s Home Value Estimator. This free tool will give you a preliminary estimate of what your home might be worth today. Knowing your home’s ballpark value can help you calculate if you’ll be responsible for capital gains from the sale.
• Save key documents: Ask your tax advisor about the federal and state documents required to file in Texas after buying or selling a house. And inquire about any tax breaks that might be available for your situation.
• Partner with a top agent: Find an experienced Texas real estate agent who can seamlessly guide you through the entire home sale process. They can provide insights about tax implications and maximize your profit.

HomeLight can connect you to top-rated agents in your Texas market. Our platform considers factors like the agent’s long-term performance record, reviews, and sale-to-list-price ratio. In other words, we find agents who will put more cash in your pocket when you close your sale.

Learn more about selling a house in Texas

If you’re selling a house in Texas, here are some helpful guides from HomeLight’s Seller Resource Center:

• What Is the Cost to Sell a House in Texas?
• When Is the Best Time to Sell a House in Texas?
• Selling a House As-Is in Texas
• How to Sell an Inherited House in Texas
• We Buy Houses Companies in Texas
• I Need to Sell My House Fast in Texas: What Are My Options?
• Don’t Fix These 7 Things When Selling Your House 
• See the Top-performing Real Estate Agents in Texas

Editor’s note: This post is for educational purposes only and shouldn’t be construed as financial or tax advice. If you need assistance navigating taxes, reach out to an advisor.

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

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