Taxes and Your Killeen Home Sale: What You Need to Know

• By We Buy Killeen Houses
• 05 April 2025

Selling your home is a major financial transaction, and it’s natural to wonder about the tax implications. If you’re selling a house in Killeen, Texas, understanding potential taxes can help you plan your finances and avoid surprises. Here’s a breakdown of what you need to know:

The Good News: Capital Gains Exclusions

For many homeowners, the most significant tax consideration when selling a home is capital gains. Fortunately, the IRS offers a substantial exclusion on capital gains from the sale of your primary residence:

• Individual Filers: You can exclude up to $250,000 of profit from your taxable income.
• Married Filing Jointly: You can exclude up to $500,000 of profit.

What Are Capital Gains?

Capital gains are the profits you make from selling an asset, in this case, your home. To calculate your capital gains, you’ll need to know:

• Your Basis: This is generally the original purchase price of your home, plus the cost of any substantial improvements you’ve made (e.g., adding a room, major renovations).
• Selling Price: This is the amount you receive from the sale of your home, minus any selling expenses (e.g., real estate agent commissions, closing costs).
• Capital Gain = Selling Price - Basis

Eligibility for the Exclusion

To qualify for the capital gains exclusion, you must meet the following criteria:

• Ownership and Use Test: You must have owned and used the home as your primary residence for at least two out of the five years leading up to the sale. ¹ These two years don’t have to be consecutive.
• One Exclusion Every Two Years: You can only claim this exclusion once every two years.

Potential Tax Scenarios in Killeen

• Profit Within Exclusion Limits: If your profit falls within the $250,000 (individual) or $500,000 (married) exclusion, you likely won’t owe federal income tax on the sale.
• Profit Exceeds Exclusion Limits: If your profit exceeds the exclusion limits, you’ll owe capital gains tax on the excess amount. The capital gains tax rate depends on your income bracket.
• Selling at a Loss: If you sell your home at a loss, you generally cannot deduct the loss from your taxable income.

Texas and Property Taxes

• Texas has no state income tax, so you won’t pay state income tax on the sale of your home.
• However, you will be responsible for paying property taxes up to the date of the sale. These taxes are typically prorated at closing, meaning you’ll pay your share of the annual property taxes based on the portion of the year you owned the home.

Important Considerations

• Keep Accurate Records: Maintain detailed records of your home’s purchase price, improvements, and selling expenses. This documentation will be crucial when calculating your capital gains.
• Consult a Tax Professional: Tax laws can be complex. It’s always best to consult with a qualified tax professional or accountant for personalized advice. They can help you understand your specific tax situation and ensure you comply with all applicable regulations.
• Closing Costs: Remember that closing costs can impact your overall profit. Keep accurate records of these expenses.

In Conclusion

Selling your Killeen home can be a financially rewarding experience. By understanding the capital gains exclusion and other tax implications, you can navigate the process with confidence. Don’t hesitate to seek professional advice to ensure you’re making informed decisions.