I Sold My House This Year—What Do I Need for Taxes?
Selling a home can be a major financial milestone, but it also comes with tax implications that are easy to overlook. Whether or not you’ll owe taxes on the sale depends on your situation—how long you owned the property, how it was used, and the profit you earned.
If you sold your home this year, here’s what you’ll need to prepare for tax season.
What to Gather Ahead of Time
Having the right paperwork in place will make the process with a professional smoother:
Closing Documents – HUD-1 or Closing Disclosure forms detailing the final settlement.
*Receipts for Capital Improvements – Major upgrades (like a new roof, kitchen remodel, or window replacements) may increase your cost basis.
Purchase and Sale Dates – These help determine your eligibility for capital gains exclusions.
Original Purchase Price + Improvements – Together, these make up your adjusted basis.
*Not all repairs count—routine maintenance typically doesn’t qualify as a capital improvement. The IRS defines capital improvements as lasting upgrades that add value, extend life, or adapt the home for new uses.
Capital improvements are permanent additions or upgrades that increase your home's value—not routine maintenance.
Learn more from the IRS on defining capital improvements.
IRS Capital Gains Exclusion Rules
The IRS allows you to exclude a considerable portion of your home sale profit from taxes—if you meet specific requirements:
You owned and lived in the home for at least two of the last five years before the sale.
You haven't claimed this exclusion on another home sale in the past two years.
Exclusion amounts:
Up to $250,000 for single filers
Up to $500,000 for married couples filing jointly
More details on the IRS Home Sale Exclusion
Walkthrough Example
Let's say you:
Bought your home in 2015 for $250,000
Invested $50,000 in capital improvements
Sold the home in 2025 for $400,000
Your adjusted cost basis is $250,000 + $50,000 = $300,000
Your gain is $400,000 - $300,000 = $100,000
Because that gain is below the $250,000 exclusion limit for a single filer, you won't owe capital gains tax.
Tips to Stay Tax-Savvy
Track Improvements: Don't discard those receipts—every upgrade counts toward your basis.
Understand What's Taxable: Routine repairs don't add to your basis; only improvements do.
Know the Use Rule: The home must have been your primary residence to qualify for the exclusion.
If in Doubt, Wait: If you're close to qualifying for the two-out-of-five-year rule, consider delaying the sale.
Check for Exceptions: Even if you don't meet the residency rule, partial exclusions may apply for reasons like job relocation or health-related moves.
What If You Don't Qualify for the Exclusion?
If you don't meet the requirements, your gain will be subject to capital gains tax:
Short-term gains (owned < 1 year) are taxed as ordinary income.
Long-term gains (owned > 1 year) are taxed at 0%, 15%, or 20%, depending on your income.
Use IRS Form 8949 and Schedule D to report the sale of your home.
Avoid Surprises at Tax Time
Selling your home may come with tax benefits—or unexpected obligations. The best way to protect yourself is to get ahead of the paperwork and work with a professional who understands the ins and outs of real estate taxation.
Need Help?
At Accounting Solutions, we specialize in guiding homeowners through major financial transitions. If you sold your home this year and want to be sure you're ready for tax season, we’re here to help.