Home Sale Capital Gains Calculator: Tax on Your Sale

How home sale capital gains are worked out

On the defaults — an $850,000.00 sale, a $400,000.00 purchase, $50,000.00 of improvements, $51,000.00 of selling costs, single, qualified, and a 15% rate — the adjusted basis is $450,000.00, the gain is $349,000.00, the taxable gain is $99,000.00, and the tax is $14,850.00. The whole calculation is four moves: add the improvements to the purchase price for the basis, subtract the basis and the selling costs from the sale price for the gain, subtract the exclusion for the taxable gain, and multiply by the rate for the tax.

Five things about the model are worth stating plainly. First, the adjusted basis is the purchase price plus improvements — $400,000.00 + $50,000.00 = $450,000.00 — and only capital improvements count: a new roof or an addition raises the basis, a coat of paint does not. Second, the gain is the sale price minus the basis minus the selling costs — $850,000.00 − $450,000.00 − $51,000.00 = $349,000.00. Third, the taxable gain is the gain minus the exclusion when the ownership-and-use test is met — $349,000.00 − $250,000.00 = $99,000.00 — and it is never below $0.00: a gain smaller than the exclusion is simply untaxed. Fourth, the exclusion is $250,000.00 single and $500,000.00 married filing jointly, and it needs the 2-of-5-years test: you must have owned and lived in the home at least 2 of the last 5 years. And fifth, the tax is the taxable gain times the capital-gains rate — $99,000.00 × 15% = $14,850.00 — and the rate depends on your income and filing status. This is the standard home-sale exclusion rule, not tax advice — the exclusion needs the 2-of-5-years test, a loss on a personal residence is not deductible, selling costs and improvements must be documented, and the rate depends on your income and filing status; check the current IRS rules or a tax professional for your situation.

The worked example, line by line

Setup: $850,000.00 sale, $400,000.00 purchase, $50,000.00 improvements, $51,000.00 selling costs, single, qualified, 15%.

Line 1 — add the improvements to the purchase price. The adjusted basis is $400,000.00 + $50,000.00 = $450,000.00.

Line 2 — subtract the basis and the selling costs from the sale price. The gain is $850,000.00 − $450,000.00 − $51,000.00 = $349,000.00.

Line 3 — subtract the exclusion. The taxable gain is $349,000.00 − $250,000.00 = $99,000.00 — the single exclusion, because the ownership-and-use test is met.

Line 4 — multiply by the rate. The tax is $99,000.00 × 15% = $14,850.00.

Every branch, checked

Married ($500,000 exclusion): Sale $850,000.00, purchase $400,000.00, improvements $50,000.00, selling costs $51,000.00, married, qualified, rate 15.00%: basis $450,000.00, gain $349,000.00, taxable gain $0.00, tax $0.00 — the $500,000.00 exclusion swallows the whole $349,000.00 gain, so the taxable gain is $0.00 and the tax is $0.00.

Test NOT met: Sale $850,000.00, purchase $400,000.00, improvements $50,000.00, selling costs $51,000.00, single, not qualified, rate 15.00%: basis $450,000.00, gain $349,000.00, taxable gain $349,000.00, tax $52,350.00 — with no exclusion the whole $349,000.00 gain is taxable, and the tax is $52,350.00 — more than triple the default.

Rate 20%: Sale $850,000.00, purchase $400,000.00, improvements $50,000.00, selling costs $51,000.00, single, qualified, rate 20.00%: basis $450,000.00, gain $349,000.00, taxable gain $99,000.00, tax $19,800.00 — the same $99,000.00 taxable gain at 20% gives a $19,800.00 tax.

Rate 0%: Sale $850,000.00, purchase $400,000.00, improvements $50,000.00, selling costs $51,000.00, single, qualified, rate 0.00%: basis $450,000.00, gain $349,000.00, taxable gain $99,000.00, tax $0.00 — at a 0% rate the tax is $0.00 whatever the gain.

Sale $1,000,000: Sale $1,000,000.00, purchase $400,000.00, improvements $50,000.00, selling costs $51,000.00, single, qualified, rate 15.00%: basis $450,000.00, gain $499,000.00, taxable gain $249,000.00, tax $37,350.00 — a $1,000,000.00 sale lifts the gain to $499,000.00, the taxable gain to $249,000.00, and the tax to $37,350.00.

Improvements $100,000: Sale $850,000.00, purchase $400,000.00, improvements $100,000.00, selling costs $51,000.00, single, qualified, rate 15.00%: basis $500,000.00, gain $299,000.00, taxable gain $49,000.00, tax $7,350.00 — $100,000.00 of improvements lifts the basis to $500,000.00, cuts the gain to $299,000.00, and the tax to $7,350.00 — improvements pay for themselves twice over.

Purchase $300,000: Sale $850,000.00, purchase $300,000.00, improvements $50,000.00, selling costs $51,000.00, single, qualified, rate 15.00%: basis $350,000.00, gain $449,000.00, taxable gain $199,000.00, tax $29,850.00 — a $300,000.00 purchase cuts the basis to $350,000.00, lifts the gain to $449,000.00, and the tax to $29,850.00.

The reverses, worked backwards

Sale price for a $0.00 taxable gain: $751,000.00 — the exact sale price is 751000.0000. At the displayed $751,000.00 the gain is $250,000.00, exactly the single exclusion, so the taxable gain is $0.00 and the tax is $0.00. $750,999.00 gives a $249,999.00 gain, still $0.00 of tax; $751,001.00 gives a $250,001.00 gain, a $1.00 taxable gain, and a $0.15 tax. The star is DOLLARS.

Improvements for a $10,000.00 tax: $82,333.33 — the exact improvements are 82333.3333. At the displayed $82,333.33 the gain is $316,666.67, the taxable gain is $66,666.67, and the tax is $10,000.00 (exact to the cent). $82,332.33 gives $10,000.15; $82,334.33 gives $9,999.85. The star is DOLLARS.

Rate for a $20,000.00 tax: 20.20% — the exact rate is 20.2020%. At the displayed 20.20% the tax is $19,998.00, $2.00 under the $20,000.00 target — rounding. 20.19% gives $19,988.10. The star is a PERCENT.

Selling costs for a $12,000.00 tax: $70,000.00 — the exact selling costs are 70000.0000. At $70,000.00 the gain is $330,000.00, the taxable gain is $80,000.00, and the tax is $12,000.00 (exact). $69,999.00 gives a $12,000.15 tax; $70,001.00 gives an $11,999.85 tax. The star is DOLLARS.

Purchase price for a $300,000.00 gain: $449,000.00 — the exact purchase price is 449000.0000. At $449,000.00 the gain is $300,000.00 (exact). $448,999.00 gives a $300,001.00 gain; $449,001.00 gives a $299,999.00 gain. The star is DOLLARS.

Sale price for a $25,000.00 tax: $917,666.67 — the exact sale price is 917666.6667. At the displayed $917,666.67 the gain is $416,666.67, the taxable gain is $166,666.67, and the tax is $25,000.00 (exact to the cent). $917,666.66 gives a $25,000.00 tax; $917,666.68 gives a $25,000.00 tax. The star is DOLLARS.

What the defaults assume

The defaults are an $850,000.00 sale, a $400,000.00 purchase, $50,000.00 of improvements, $51,000.00 of selling costs, single, qualified, and a 15% rate — basis $450,000.00, gain $349,000.00, taxable gain $99,000.00, tax $14,850.00. With a sale of $501,000.00, Sale $501,000.00, purchase $400,000.00, improvements $50,000.00, selling costs $51,000.00, single, qualified, rate 15.00%: basis $450,000.00, gain $0.00, taxable gain $0.00, tax $0.00 — the sale exactly covers the basis and costs, so there is no gain at all. With a sale of $2,000,000.00, Sale $2,000,000.00, purchase $400,000.00, improvements $50,000.00, selling costs $51,000.00, single, qualified, rate 15.00%: basis $450,000.00, gain $1,499,000.00, taxable gain $1,249,000.00, tax $187,350.00. With selling costs of $400,000.00, Sale $850,000.00, purchase $400,000.00, improvements $50,000.00, selling costs $400,000.00, single, qualified, rate 15.00%: basis $450,000.00, gain $0.00, taxable gain $0.00, tax $0.00 — the costs eat the whole gain. With selling costs of $500,000.00, Sale $850,000.00, purchase $400,000.00, improvements $50,000.00, selling costs $500,000.00, single, qualified, rate 15.00%: basis $450,000.00, gain -$100,000.00, taxable gain $0.00, tax $0.00 — a loss, and a loss on a personal residence is not deductible. With married filing jointly and a $1,000,000.00 sale, Sale $1,000,000.00, purchase $400,000.00, improvements $50,000.00, selling costs $51,000.00, married, qualified, rate 15.00%: basis $450,000.00, gain $499,000.00, taxable gain $0.00, tax $0.00 — the $500,000.00 exclusion swallows the whole gain. With a 20% rate and the test NOT met, Sale $850,000.00, purchase $400,000.00, improvements $50,000.00, selling costs $51,000.00, single, not qualified, rate 20.00%: basis $450,000.00, gain $349,000.00, taxable gain $349,000.00, tax $69,800.00. With improvements of $0, Sale $850,000.00, purchase $400,000.00, improvements $0.00, selling costs $51,000.00, single, qualified, rate 15.00%: basis $400,000.00, gain $399,000.00, taxable gain $149,000.00, tax $22,350.00.

Output · formula · meaning

Who uses this

• The seller on an $850,000.00 sale: they learn the tax is $14,850.00 — and they check the $751,000.00 reverse to see the sale price at which the taxable gain first hits $0.00.
• The married couple selling the same house: they learn the tax is $0.00 — and they check the $500,000.00 exclusion to see how much gain it shelters.
• The seller who renovated: they learn $100,000.00 of improvements cuts the tax to $7,350.00 — and they check the $82,333.33 reverse to see the improvements that give a $10,000.00 tax.
• The seller who moved out early: they learn losing the 2-of-5-years test raises the tax to $52,350.00 — and they check the 20% branch to see the worst case at $69,800.00.

Accuracy & limitations

The math is first-principles: the adjusted basis is the purchase price plus improvements; the gain is the sale price minus the basis minus the selling costs; the taxable gain is the gain minus the exclusion when the ownership-and-use test is met, otherwise the full gain, never below $0.00; the tax is the taxable gain times the capital-gains rate. Every figure is rounded to cents half-up, and intermediate money values are rounded to cents before the next step. What the model cannot do is tell you what YOUR tax will be: it is the standard home-sale exclusion rule only — it does NOT check whether you really meet the 2-of-5-years test, whether the home was ever rented out or used for business, or whether a partial exclusion applies; it does NOT model state capital-gains tax, the 3.8% net investment income tax, or depreciation recapture on a former rental; it does NOT add the cost of the sale beyond the selling costs you enter; and it assumes a single long-term rate on the whole taxable gain, while real rates are banded by income. A loss on a personal residence is not deductible. Use it to size the tax before you sell, then check the current IRS rules or a tax professional for your situation.

Frequently asked questions