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Sold in Texas? Here’s What the IRS Wants to Know

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June 10, 2025

Sold in Texas? Here’s What the IRS Wants to Know

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(And What Texas, Gloriously, Does Not)

The Lone Star Advantage in Real Estate Capital Gains

Selling your primary home in Texas? Well, bless your savvy heart—and your wallet. While the IRS does have something to say about those gains, the State of Texas has decided to politely stay out of your business. (A rare government flex we can all get behind.)

Let’s break it down like we’re sitting on a shaded porch in Southlake, sipping Topo Chico, talking smart moves and smarter tax planning.

Disclaimer: We’re your favorite real estate professionals—not tax attorneys, CPAs, or financial planners. This article is for general info only. Always consult your personal tax advisor before making decisions about your own home sale.

1. Federal Capital Gains Exclusion

The IRS offers some generous exclusions if the home you’re selling is your primary residence. Here’s what qualifies:

✅ $250,000 Exclusion if you’re single

✅ $500,000 Exclusion if you’re married and filing jointly

To qualify, you must:

  • Have owned the home for at least 2 out of the last 5 years,
  • Have lived in the home as your primary residence for at least 2 out of the last 5 years,
  • Not have used this exclusion in the last two years.

💡 Even if the entire gain is excluded, you might still receive a 1099-S form. That doesn’t mean you owe taxes—it just means the IRS wants you to report the sale.

2. Texas Tax on Capital Gains

This is where Texas stands out.

🚨 There is NO state income tax in Texas.

That means: No additional capital gains tax at the state level. Nada. Zip. Zero.

This is a huge win compared to states like California, which tax capital gains as regular income—sometimes pushing your tax bill into “you’ve-got-to-be-kidding-me” territory.

So in Texas, if your capital gains exceed the federal exclusion, you only pay federal capital gains tax, based on your income bracket and filing status. No state tax add-on.

3. Calculating Your Capital Gain

Here’s the simple version:

Capital Gain = Sale Price – Adjusted Basis

What’s your adjusted basis?

  • Original purchase price
  • Major improvements (think new kitchen, roof, room addition—not new curtains)
  • Certain closing costs and selling expenses (like REALTOR® commissions) = Your adjusted basis

🧠 Example:

Bought your Southlake home for $800,000.

Spent $150,000 on a pool, new hardwood floors, and smart home upgrades.

Sold it for $1,600,000.

Your gain is $650,000.

If you’re a married couple filing jointly, you can exclude $500,000 of that gain.

Only the remaining $150,000 would be taxed federally—and again, not at all by Texas.

4. Why This Matters in Today’s Market

With home values in Grapevine, Colleyville, Westlake, and Southlake soaring, it’s easier than ever to hit those capital gains thresholds. If you’ve owned your home for more than a few years and made improvements, there’s a good chance you’ve built significant equity.

At The Assaad Group, we walk you through not just selling, but strategizing—including helping you prep for these conversations with your tax pro. Our mission is all about Luxury with Heart, and that includes helping you keep more of your hard-earned wealth in your next chapter.

💬 Final Thought: “Don’t Mess With Taxes… Unless You’re in Texas”

When it comes to real estate gains, Texas is a tax-friendly paradise. But even paradise comes with a few federal strings. The good news? With the right team (that’s us 👋), the right information, and the right tax advisor, you can sell smart and stay stress-free.

Thinking about selling your home in 2025? Let’s talk timing, strategy, and how to thrive in every sense of the word. Because here at The Assaad Group, we believe success is sweeter when you get to keep more of it.

📸 Suggested Image:

  • A cozy Texas front porch with a “SOLD” sign and cowboy boots on the steps
  • Infographic on Capital Gains Exclusion Rules
  • A Texas outline with a big stamp: “NO STATE INCOME TAX”

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