Answers by Paul Fritz Jr

When you sell a house in Texas, the main tax most sellers need to budget for is their prorated share of that year’s property taxes. In a typical Texas sale, property taxes are adjusted at closing, so the seller is usually charged for the portion of the year they owned the home, and that amount is credited to the buyer. This happens because Texas property taxes are generally paid in arrears, even though the exact tax bill may not be due until later. Texas does not have a state income tax, and there is not a separate real estate sales tax on the sale of your home. On the federal side, many homeowners can exclude up to $250,000 in capital gain if single, or up to $500,000 if married filing jointly, when they meet the IRS ownership and use tests. In general, that means you owned the home and lived in it as your primary residence for at least 2 of the last 5 years before the sale. The part that can change is whether the full exclusion applies. If the home was used as a rental, used for business, or if there are depreciation issues or unusual circumstances, your tax result may be different. That’s why I always recommend sellers speak with a CPA before closing so they know exactly what to expect under current tax law.