Do You Pay Taxes When You Sell Your Home?
Short answer
Usually not, up to a limit. If you owned your home and lived in it as your main home for at least two of the five years before the sale, you can exclude up to $250,000 of gain from income ($500,000 for most married couples filing jointly). Gain above that is generally taxed as a capital gain. A loss on selling your personal home is not deductible.
For many New Yorkers, a home is their largest asset, and with years of price appreciation in Queens, Brooklyn, and Long Island, the gain can be large. The good news: federal tax law excludes a large amount of home-sale profit. Here’s how the rule works and where people get tripped up.
The basic rule
| Single | Married filing jointly | |
|---|---|---|
| Maximum gain you can exclude | $250,000 | $500,000 |
| Ownership test | Owned the home at least 2 of the last 5 years | At least one spouse owned it 2 of the last 5 years |
| Use test | Lived in it as your main home at least 2 of the last 5 years | Both spouses lived in it 2 of the last 5 years |
| How often | Generally once every 2 years | Generally once every 2 years |
The two years don’t have to be consecutive.
How to figure your gain
- Amount realized: sale price minus selling costs (broker commission, transfer taxes paid by you, legal fees)
- Adjusted basis: what you paid, plus certain closing costs, plus capital improvements (a new roof, renovated kitchen, addition), minus certain items such as depreciation if you rented the home
- Gain: amount realized minus adjusted basis
Improvements add to basis; repairs and maintenance generally don’t. That’s why old renovation receipts are worth keeping. See how long to keep records.
Example: A long-time Queens homeowner
- Bought in 2009 for $400,000; spent $50,000 on a new kitchen and roof. Adjusted basis: $450,000
- Sold in 2026 for $900,000 with $50,000 of selling costs. Amount realized: $850,000
- Gain: $850,000 − $450,000 = $400,000
Married filing jointly: the full $400,000 is excluded, so no federal tax on the gain.
Single: $250,000 is excluded, and the remaining $150,000 is generally a long-term capital gain.
Without the $50,000 of improvement receipts, the gain would have been $450,000, and the single seller would have owed tax on $200,000.
If you don’t meet the two-year tests
You may still qualify for a partial exclusion if you sold because of a work-related move, a health-related move, or certain unforeseen events such as a death or divorce. The exclusion is prorated based on how long you met the tests.
Special situations
- Surviving spouses: may still use the $500,000 limit if the sale happens within two years of the spouse’s death, they haven’t remarried, and the tests are met.
- Rented or used for business: gain equal to depreciation you claimed (or could have claimed) after May 6, 1997 generally can’t be excluded. If you rented part of the home, see rental property bookkeeping.
- Home office: depreciation claimed for a home office is also generally taxable on sale. See home office deduction.
- Nonqualified use: periods when the home wasn’t your main home (for example, renting it out before you moved in) can reduce the exclusion.
- Losses: a loss on the sale of your personal home isn’t deductible.
- Second homes and investment property don’t qualify for the exclusion.
Reporting the sale
If all of your gain is excludable, you generally don’t have to report the sale on your return unless you received an information return for it from the closing. If any gain is taxable, or you received that form, the sale must be reported.
Don’t forget state taxes
New York generally follows the federal exclusion for residents. Sellers who aren’t New York residents may face estimated tax payments at closing. Ask before you sign the contract.
Planning ahead
- Pull together your purchase closing statement and every improvement receipt now.
- If you’re near the two-year mark, waiting a few months can save a lot of tax.
- Use the cash-flow planning in our budgeting guide for the move.
Selling a home this year?
We’ll calculate your basis, confirm the exclusion, and plan the tax before closing.
Frequently asked questions
How much profit can I make on my home without paying taxes?
Up to $250,000 of gain if single, or up to $500,000 if married filing jointly, as long as you meet the ownership and use tests (owned and lived in the home for at least 2 of the 5 years before the sale).
Do I have to report the sale of my home?
If you qualify to exclude all of the gain, you generally don’t need to report the sale unless you received an information return for the sale. If any gain is taxable, you must report it.
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