How Selling a House Affects Your Taxes: A Complete Guide for Austin Hill County Homeowners

Selling a home is one of the biggest financial moves you can make — and if you're a homeowner in Austin Hill County, you're probably wondering:

"How will this affect my taxes?"

The good news? In many cases, you won’t owe a dime in federal taxes on the sale of your home. But it depends on your profit, how long you’ve lived there, and a few other key factors.

As an experienced real estate agent in Austin Hill County, I’m here to walk you through what you need to know about the tax implications of selling your home, so you can plan wisely and avoid costly surprises.

💡 What Is Capital Gains Tax on a Home Sale?

When you sell your home for more than you paid for it, that profit is called a capital gain — and it may be subject to capital gains tax.

But here’s where it gets better:

✅ The IRS Exclusion Rule (Section 121)

If you meet certain conditions, you can exclude up to $250,000 of capital gains from taxes if you’re single — and up to $500,000 if you’re married and filing jointly.

🏡 Do You Qualify for the Tax Exemption?

To qualify for the capital gains tax exclusion, you must meet all of the following:

• Ownership Test: You owned the home for at least 2 of the last 5 years before selling.

• Use Test: You lived in the home as your primary residence for 2 of the last 5 years.

• No Other Exclusion in the Last 2 Years: You haven’t claimed this exclusion on another home sale in the past 2 years.

✅ Example:
Let’s say you bought your Austin Hill County home in 2017 for $300,000 and sold it in 2025 for $550,000. Your capital gain is $250,000.
If you're single, you’d owe no tax, because your gain is within the $250,000 exclusion.

🧾 What If You Don’t Qualify?

If you don’t meet the ownership or use tests, or if your gain exceeds the exemption, you may owe capital gains tax.

Capital Gains Tax Rates:

• 0%, 15%, or 20%, depending on your income and filing status.

You may also be subject to the Net Investment Income Tax (an additional 3.8%) if your income is above certain thresholds.

🛠️ What Can Reduce Your Taxable Gain?

Here are a few smart strategies to reduce how much profit is taxed:

1. Add the Cost of Home Improvements

Major improvements (not regular maintenance) can be added to your home's cost basis. Examples include:

• Room additions

• Roof replacements

• Kitchen remodels

• HVAC upgrades

2. Include Selling Costs

You can deduct certain costs from your gain, such as:

• Real estate commissions

• Title and escrow fees

• Legal fees

• Advertising costs

3. Keep Records!

Keep a file of all receipts and records related to improvements and sales expenses. The more you document, the more you can deduct.

💼 What About Investment or Rental Property?

If you’re selling a home that was used as a rental or investment, different tax rules apply. You likely won’t qualify for the primary residence exemption, and you may face depreciation recapture taxes in addition to capital gains.

But — you might benefit from a 1031 exchange, which allows you to defer taxes by reinvesting the sale proceeds into another investment property.

📍 Local Considerations in Austin Hill County

While Texas has no state income tax, it’s still important to consider:

• Property tax assessments after sale.

• Homestead exemptions and how selling might affect them.

• Capital gains impact at the federal level, especially with rising home prices in Austin Hill County.

📊 Did you know?
The average home price in Austin Hill County has risen significantly over the past five years. That’s great news for your equity — but it makes understanding the tax rules even more important!

👣 What Should You Do Before Selling?

Here’s your tax-smart checklist before listing your home:

✅ Review your ownership and use history.
✅ Estimate your potential capital gain.
✅ Gather records of home improvements and sale-related costs.
✅ Consult with a tax advisor or CPA.
✅ Work with a local real estate agent who understands the financial side of selling.

👋 Final Thoughts: Don’t Let Taxes Catch You Off Guard

Selling your home in Austin Hill County can be incredibly profitable — especially if you understand the tax rules ahead of time.

As a trusted local real estate agent, I can help you analyze your equity, estimate your net proceeds, and connect you with professionals to make sure you’re fully prepared for tax season.

📞 Let’s talk — no pressure, just real advice. I’m here to help you sell smart and keep more of your hard-earned money.