Do I Have to Pay Taxes When I Sell My House in California?
It depends on how much profit you make. Most homeowners who sell their primary residence do not owe federal capital gains taxes thanks to the home sale exclusion. You can exclude up to $250,000 in profit if you are single, or $500,000 if you are married filing jointly.
To qualify for this exclusion, you must have owned and lived in the home as your primary residence for at least 2 of the last 5 years before selling. If you meet this requirement and your profit is under the exclusion amount, you owe zero federal capital gains taxes.
California also taxes capital gains, but it treats them as regular income. The state tax rate depends on your total income and ranges from 1% to 13.3%. If your profit exceeds the federal exclusion amounts, you will owe both federal and state taxes on the excess.
Beyond capital gains, there are other costs to be aware of. California counties charge a transfer tax when a home is sold, typically $1.10 per $1,000 of the sale price. Some cities add their own transfer taxes on top of the county tax. For example, Los Angeles charges an additional city transfer tax.
If you inherited the property, the tax situation is different. Inherited homes receive a stepped-up cost basis, meaning your basis is the home's fair market value at the time of the previous owner's death. This often reduces or eliminates capital gains taxes on inherited properties.
If you sell to Acquily, we do not provide tax advice, but we can connect you with local CPAs who specialize in real estate transactions. Many sellers find that a quick cash sale actually simplifies their tax situation because the transaction is straightforward with no complicated credits or contingencies.
One more thing: if you are selling a rental or investment property, the rules are different. You may owe depreciation recapture taxes in addition to capital gains. Consult a tax professional before selling investment property.
Frequently Asked Questions
How much tax do I pay when I sell my house in California?
If you lived in the home for 2 of the last 5 years, you can exclude up to $250,000 (single) or $500,000 (married) in profit from federal taxes. California taxes any gains above those amounts as regular income.
Do I pay taxes if I sell my house at a loss?
No. If you sell your primary residence for less than you paid, you do not owe capital gains taxes. However, you also cannot deduct the loss on your personal residence.
What is the transfer tax in California?
The standard California county transfer tax is $1.10 per $1,000 of the sale price. Some cities charge additional transfer taxes. When you sell to Acquily, we cover all closing costs including transfer taxes.
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