Selling your house in California doesn’t just mean signing papers and collecting a check. Taxes—especially capital gains tax, property tax at closing, and transfer tax—play a major role in how much money you keep.
This guide answers the most common questions homeowners ask about taxes when selling a house in California, including:
- How much tax do you pay if you sell a house in California?
- Do sellers pay property taxes at closing in California?
- Can you avoid capital gains tax on a house sale?
- Who pays sales tax, the buyer or the seller?
- Who is exempt from paying taxes in California?
How Much Tax Do You Pay if You Sell a House in California?
When you sell your California property, the biggest tax you might face is the capital gains tax.
Federal Capital Gains Tax
Taxed based on your profit and income bracket.
Short-term gains (owned less than a year) are taxed as regular income.
Long-term gains (owned over a year) are taxed at 0%, 15%, or 20%, depending on income.
Reference: IRS Capital Gains Tax Guide.
California State Capital Gains Tax
California does not offer a separate capital gains rate.
Profits are taxed as regular state income.
Rates range from 1% to 13.3%.
Reference: California Franchise Tax Board.
Example:
If you bought your home for $400,000 and sold it for $700,000, your profit is $300,000. After exemptions, the taxable amount is subject to both federal and state taxes.
Internal resource:Sell My House Fast California
Do Sellers Pay Property Taxes at Closing in California?
Yes. Property taxes are prorated at closing between buyer and seller.
If you have prepaid taxes, the buyer will reimburse you for the period after closing.
If you owe taxes, the amount is deducted from your proceeds.
This ensures that each party pays its fair share.
Do You Pay No Capital Gains Tax on a House Sale?
You may qualify for an exemption under IRS Section 121 if the house is your primary residence.
$250,000 exclusion for single filers.
$500,000 exclusion for married couples filing jointly.
Requirement: You must have lived in the property for 2 out of the last 5 years.
Reference: IRS Home Sale Exclusion Rules.
When You Don’t Qualify for Exemption
If the property was an investment or rental.
If you used the exclusion on another home in the last two years.
If you did not meet the residency requirement.
Who Is Responsible for Sales Tax, the Buyer or Seller, in California?
There is no sales tax on real estate in California.
Instead, sellers often pay:
Transfer Tax – A county or city fee when ownership changes.
Example: Los Angeles County charges $1.10 per $1,000 of property value.
Some cities, such as San Francisco, impose additional transfer taxes.
Reference: California Dept. of Tax and Fee Administration.
Who Is Exempt from Paying Sales Tax in California?
Since real estate is not subject to sales tax, exemptions mainly relate to capital gains tax.
Primary Residence Exclusion: $250,000 (single) or $500,000 (married).
Hardship Exemptions: Partial exclusions for job relocation, divorce, or health reasons.
1031 Exchange: Investors can defer capital gains tax by reinvesting in another property.
Reference: IRS 1031 Exchange Guide.
Other Costs When Selling a House in California
Besides taxes, sellers may also pay:
Real estate agent commissions: 5–6%.
Escrow and title fees: $2,000–$5,000.
Mortgage payoff balance (if any).
HOA dues (if applicable).
Repairs and staging costs.
Internal resource: How to Sell My House Fast in San Diego
FAQs About Taxes When Selling a Home in California
1. Do I always owe capital gains tax when I sell?
Not if you qualify for the IRS primary residence exclusion.
2. How do I figure out my taxable gain?
Profit = Sale price − Purchase price − Improvements − Closing costs.
3. Who is responsible for paying the property transfer tax in California?
Usually, the seller does, but this can be talked about.
4. Do I report the sale even if I owe no tax?
Yes, the IRS requires you to file.
5. Can I completely avoid taxes?
Yes, through exemptions or by using a 1031 exchange for investment property.
Final Thoughts
When you sell a house in California, taxes can have a big effect on how much money you make.
Key takeaways:
Capital gains tax applies to profits but can often be excluded.
Property taxes are prorated between buyer and seller at closing.
No sales tax applies to home sales, but transfer taxes may be levied.
Exemptions and strategies like 1031 exchanges can reduce or eliminate taxes.
If you want to sell quickly without worrying about repairs, commissions, or lengthy timelines, a cash home buyer may be your best option.
