Texas is an excellent place to be a home seller. The Texas economy remains strong, and people are still moving to the state. But taxes are a big consideration in profit when you sell your home. A good thing to remember is that selling a house in Texas doesn’t have a state income tax.

In this post, we’ll talk about the most important tax you need to deal with when selling a property: your capital gains tax.

What are Capital Gains Taxes & How Do They Work in Texas?

Capital gains are the profits you make by selling an asset. If you sell an asset for more than you paid for it, you are making a capital gain.

We’re talking about the capital gains you make when you sell a house, condo, land, or any other real estate. Capital gains tax is a tax you pay on your capital gains.

There are two types of capital gains taxes in Texas:

  • Short-Term Capital Gains: For assets that you’ve held for less than a year before selling them.
  • Long-Term Capital Gains: For assets that you’ve held for more than a year before selling them.

How to Calculate Capital Gains

It’s easy to calculate your capital gains. You have to look at your tax return and look at the capital gains section. There, you’ll find the net profit you made on the sale of your property. Let’s say you made $50,000 selling your house. The capital gains taxable amount is $30,000.

You have to pay capital gains tax in Texas if you have made more than $20,000 of profits. If you meet this requirement, you must pay Texas 10% capital gains tax on the profits.

Do You Really Have to Pay for Capital Gains Taxes?

There are some cases when you don’t have to pay capital gains taxes on a Texas home sale. This is because there are exemptions built into the tax code. However, you need to know if you’re qualified for an exemption first. 

How do you know? One, the house you’re selling should be your primary residence. Second, you should own the house for at least two years. Third, you must have lived in the house for over two years over the last five years. Lastly, you shouldn’t have an existing claim for this exemption or another property within the last two years. 

When you meet these requirements, it’s possible you won’t have to pay capital gains taxes. However, you need to pay capital gains on any profits received over those amounts.

Consider Property Taxes, Too

You are also still responsible for property in Texas, and the state is one of the most expensive. Homeowners pay an average of $3,327 in real estate taxes in Texas. Until you sell your property, you are still responsible for the property tax.

The Bottomline

Paying for capital gains taxes when you sell a property is a natural part of the selling process. This is if you’ve made a profit on the sale of your house. Some exemptions can help lower your tax bill. Don’t forget to consider property taxes as well. Explore your options to take your property out on the market as soon as possible. Doing so will help avoid paying expensive taxes. 

You can save more money fast by selling your Texas home to a cash home buyer. Greenlight Offer will give you the best cash offer for your property. We understand your needs, and we aim to meet them. Get in touch with us!