US Capital Gains Tax 12-26-25

For the 2025 tax year, U.S. federal capital gains on the sale of a house (your primary residence) may be excluded up to $250,000 for single filers and $500,000 for married couples filing jointly, provided you meet specific ownership and use tests.  

Any taxable gain beyond these exclusion amounts is subject to long-term capital gains tax rates of 0%, 15%, or 20%, depending on your total taxable income. 

Principal Residence Exclusion

To qualify for the full exclusion, you must meet the following criteria during the five-year period ending on the date of the sale: 

Ownership Test: You must have owned the home for at least two years.

Use Test: You must have lived in the home as your main residence for at least two years (the 24 months of residence do not need to be continuous). 

If you meet these requirements, the excluded gain does not need to be reported on your tax return unless you receive a Form 1099-S, Proceeds from Real Estate Transactions. 

2025 Long-Term Capital Gains Tax Rates (for taxable gains) 

If your gain exceeds the exclusion limit (or the home was an investment property not used as a primary residence for the required time), the remaining profit is subject to the following federal tax rates based on your 2025 taxable income and filing status: 

Capital Gains Tax Rate   Taxable Income if Married Filing Jointly

0%                                   Up to $96,700 

15%                                 $96,700 to $600,050

20%                                 Over $600,505

*Note: Higher-income earners may also be subject to an additional 3.8% Net Investment Income Tax (NIIT). Furthermore, if you claimed depreciation on an investment property, that portion of the gain may be subject to a separate maximum 25% depreciation recapture tax rate. 

For detailed information and worksheets, consult IRS Publication 523, Selling Your Home or a tax professional. 

For 2025, the US capital gains tax rates on the sale of a house range from 0% to 20% for long-term gains, depending on your income. You may be able to exclude up to $250,000 of the profit (or $500,000 if married filing jointly) if it was your primary residence and you meet certain conditions. 

2025 Capital Gains Tax Rates on Home Sales

The specific rate depends on how long you owned the home and your total taxable income. 

Long-Term Capital Gains (Asset held for more than one year)

For most homeowners, gains will be long-term and taxed at preferential rates. The 2025 federal long-term capital gains tax rates are 0%, 15%, and 20%.

Additionally, high-income earners may be subject to an additional 3.8% Net Investment Income Tax (NIIT). 

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Comments

Most Married Retirees have taxable income under $96,700 and can sell their homes, but will have to pay capital gains tax unless they sell their house for less than $500,000.  Increasing the capital gains exemption to $1 million would help retirees downsize. 

The increase in the supply of single-family homes must target starter homes under $250,000. The price of new construction needs to be reduced by increasing the supply of lumber and concrete for subdivisions in the exurbs.

For 2025, the U.S. federal estate tax exemption is $13.99 million per individual. For married couples, this amount is portable, effectively allowing a combined exemption of $27.98 million. 

Norb Leahy, Dunwoody GA Tea Party Leader