Texas Capital Gains Tax on a Home Sale: State and Federal Rules
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Last updated November 14, 2026. Citations come from the Texas statutes and official agency pages linked in Sources. Where we could not confirm something on an official page, we say so.
Texas has no state income tax, and the federal home sale exclusion lets many sellers exclude the first $250,000 of gain, or $500,000 for a married couple filing jointly. The Texas Comptroller states that Texas has no state income tax, and IRS Publication 523 sets the exclusion and its tests. This guide summarizes those tests. It is not tax advice, and we did not review rates on gain above the exclusion.
Texas
The Comptroller’s Fiscal Notes states that Texas has no state income tax. We did not find a Comptroller page that addresses gains on home sales specifically, so confirm details with a tax professional.
The federal exclusion
According to IRS Publication 523 (2025), if you meet certain conditions you may exclude the first $250,000 of gain from the sale of your home from income, and the exclusion rises to $500,000 for a married couple filing jointly.
- Ownership test: you owned the home at least 24 months out of the last five years before the sale date. For a married couple filing jointly, only one spouse has to meet it.
- Frequency: you can take the exclusion only once during a two-year period.
- Depreciation: the exclusion is reduced to the extent of depreciation adjustments for rental or business use, and depreciation claimed after May 6, 1997 is recognized.
- Like-kind exchange: acquiring the home through a Section 1031 exchange is an automatic disqualification.
The publication also has a use test and partial-exclusion rules, which we did not summarize here. Read the full publication or ask a tax professional.
Inherited and rental homes
Different rules can apply to inherited property and rentals. We did not review basis rules for inherited homes or federal rates on gain above the exclusion. For a rental or investment property, see Texas 1031 exchange.
What to do before you sell
- Count your months of ownership and use, and note any rental years.
- Gather your purchase price, closing costs and improvement records.
- Ask a tax professional what applies to your sale. Also see Texas inheritance and estate tax if you inherited the house.
How to sell a house in Texas when you want to understand the tax first
- Ask a tax professional whether your gain qualifies for the exclusion before you set a price.
- Get a payoff for any mortgage and the amount of any unpaid property tax. Both are paid from the sale proceeds at closing.
- Compare offers on what you net after repairs, commissions and closing costs, not on the headline price.
- If you want a fast, simple closing, ask for a written cash offer. We buy houses as-is, with no repairs and no agent commission. See how we buy houses in Texas.
Texas capital gains home sale FAQ
Does Texas tax capital gains?
Texas has no state income tax, according to the Comptroller's Fiscal Notes.
How much gain can I exclude on a home sale?
The first $250,000, or $500,000 for a married couple filing jointly, if you meet the IRS conditions (Publication 523, 2025).
How long must I own the home?
At least 24 months out of the last five years before the sale date (Publication 523).
Can I use the exclusion every year?
No. You can take it only once during a two-year period (Publication 523).
Sources
- IRS Publication 523, Selling Your Home
- Texas Comptroller: Texas is open for small business (Fiscal Notes)
This guide is general information, not legal or tax advice. Laws, forms and fees change, so confirm details with the official office or a Texas attorney or tax professional.