Taxes on Selling a House in Houston TX: What to Expect
Reviewed by Mark Lee
Taxes on Selling a House in Houston: What to Expect
Selling a home in Houston can be a financially rewarding move—but before you celebrate your closing proceeds, it’s critical to understand the taxes and selling costs that may affect your final net profit.
Texas is often viewed as a tax-friendly state for homeowners, especially compared to places like California. While that reputation is largely deserved, selling real estate in Houston still comes with important federal tax considerations, local property tax proration, and closing expenses that sellers should plan for ahead of time.
This guide breaks down the key taxes and financial obligations Houston sellers may encounter, explains how they work in Texas, and shares practical ways to prepare so you’re not caught off guard at closing.
Capital Gains Tax When Selling a Home in Texas
One of the most common questions Houston homeowners ask is whether Texas charges capital gains tax when selling a house.
The short answer: Texas does not have a state capital gains tax.
However, federal capital gains tax may still apply, depending on your situation.
What Counts as Capital Gains?
Capital gains are the profits you earn when selling an asset for more than you paid for it. For example:
Purchase price: $300,000
Qualified improvements: $50,000
Sale price: $500,000
Capital gain: $150,000
That gain may be subject to federal taxation unless you qualify for an exclusion.
Federal Capital Gains Tax Rates
Federal capital gains are categorized as either short-term or long-term:
Short-term gains: Property owned for one year or less
Taxed as ordinary income
Long-term gains: Property owned for more than one year
Taxed at 0%, 15%, or 20% depending on income level
Most homeowners selling a primary residence fall into the long-term category.
The Primary Residence Capital Gains Exclusion
The IRS allows eligible homeowners to exclude a significant portion of capital gains:
$250,000 for single filers
$500,000 for married couples filing jointly
To qualify, you must generally meet these conditions:
The home was your primary residence
You lived in the home for at least two of the last five years
You owned the home for at least two of the last five years
You haven’t used the exclusion on another home within the last two years
If you qualify and your gain is below the exclusion threshold, you may owe zero federal capital gains tax.
For more details, see IRS Publication 523:
https://www.irs.gov/publications/p523
Property Taxes in Houston and How They’re Handled at Sale
Texas property taxes are higher than the national average, and Houston homeowners are often well aware of that fact. However, property taxes are not a tax on selling the home itself—they are prorated at closing.
How Property Tax Proration Works
In Texas, property taxes are paid in arrears, meaning:
The seller has lived in the home during the year but has not yet paid that year’s taxes
At closing, taxes are prorated based on the number of days the seller owned the home that year
The seller credits the buyer for their portion, and the buyer pays the full bill later
Example:
If you sell your Houston home in June, you’ll typically credit the buyer for January through June’s property taxes at closing.
Once the sale is complete, you are no longer responsible for future property taxes on that home.
For official guidance, visit the Texas Comptroller’s Office:
https://comptroller.texas.gov/taxes/property-tax/
Are There Transfer Taxes in Houston or Texas?
Unlike many states, Texas does not impose a real estate transfer tax when property changes ownership.
That means:
No state transfer tax
No county or city transfer tax in Houston
This can be a major cost advantage for Texas sellers compared to states that charge transfer taxes based on sale price.
That said, sellers still pay recording and deed preparation fees, which are relatively minor and typically handled through the title company at closing.
Selling an Inherited Home in Houston
If you’ve inherited a property in Houston, the tax treatment is often more favorable than many people expect.
No Inheritance or Estate Tax in Texas
Texas does not impose:
Estate tax
Inheritance tax
However, federal estate tax rules may apply in very large estates, though most homeowners are unaffected.
Step-Up in Basis Explained
Inherited homes benefit from a step-up in basis, meaning:
The property’s tax basis resets to its fair market value at the time of inheritance
Past appreciation during the original owner’s lifetime is not taxed
If you sell the inherited home soon after inheriting it and the sale price is close to the appraised value, capital gains tax may be minimal or nonexistent.
If you hold the property and it increases in value after inheritance, only that additional appreciation may be taxable.
Other Selling Costs Houston Homeowners Should Expect
While taxes may be lighter in Texas, sellers still need to plan for standard closing and transaction costs.
Title Insurance and Escrow Fees
In Texas, it’s customary for the seller to pay for the owner’s title insurance policy. Costs typically range from:
0.5% to 1% of the sale price
Escrow and settlement fees cover document preparation, fund disbursement, and closing services. These fees are often split between buyer and seller, depending on local custom and negotiation.
Real Estate Agent Commissions
Commission structures have evolved, but many Houston sellers still see:
2%–3% for the listing agent
Buyer’s agent commission negotiated separately
Some sellers choose to offer buyer agent compensation to attract stronger offers and reduce time on market.
Repairs, Credits, and Concessions
Depending on inspections and negotiations, sellers may also pay for:
Repair credits
Home warranty coverage
HOA transfer fees
Survey updates
These costs vary widely by property and deal structure.
Ways Houston Sellers Can Prepare for Taxes and Costs
Selling a home doesn’t have to come with unpleasant surprises. A little preparation can go a long way.
Estimate Your Home’s Value Early
Knowing your approximate sale price helps you:
Estimate potential capital gains
Plan for net proceeds
Decide whether improvements are worthwhile
Keep Records of Improvements
Save receipts for capital improvements such as:
Roof replacements
HVAC systems
Major renovations
These costs can increase your tax basis and reduce taxable gains.
Talk to a Tax Professional
A CPA or tax advisor can help you:
Confirm eligibility for capital gains exclusions
Identify deductions or partial exclusions
Plan timing for the sale
Work With a Knowledgeable Local Expert
An experienced Houston real estate professional can:
Estimate your true net proceeds
Explain local closing costs
Structure offers to reduce friction and delays
Frequently Asked Questions About Taxes When Selling a House in Houston
Do I pay capital gains tax when selling my house in Houston?
Texas does not charge capital gains tax, but federal capital gains tax may apply unless you qualify for the primary residence exclusion.
How much tax do I pay when selling a house in Texas?
There is no state income tax or transfer tax, but sellers typically pay prorated property taxes, title insurance, escrow fees, and possibly federal capital gains tax.
Are property taxes paid at closing in Houston?
Property taxes are prorated at closing. The seller credits the buyer for their portion of the year, and the buyer pays the bill when it’s due.
Is selling an inherited home taxable in Texas?
Texas does not tax inheritances. Federal capital gains may apply only to appreciation after inheritance due to the step-up in basis.
Can I reduce taxes when selling my house?
Yes. Capital gains exclusions, accurate basis calculations, and proper documentation can significantly reduce or eliminate taxes owed.
Final Thoughts
Selling a house in Houston is often more tax-friendly than in many other states—but that doesn’t mean there are no financial considerations. Understanding how federal capital gains, property tax proration, and closing costs work puts you in control of the process and helps protect your bottom line.
Whether you’re selling a primary residence, rental property, or inherited home, planning ahead ensures a smoother transaction and fewer surprises when you reach the closing table.
How Absolute Properties Helps Houston Sellers
Absolute Properties makes it easy for Houston homeowners to sell fast - even when facing challenges like financial difficulties, inherited properties, troublesome tenants, or repairs.
If you’re thinking, “I need to sell my house fast in Houston…” We buy houses in Houston in any situation or condition!
As-is, fast cash offers with clear terms
Many closing costs covered; no realtor commissions in most cases
You choose the closing date (as little as 7 days, case-dependent)
Coordination with experienced title company for a compliant sale process
Call or text: (713) 230-8059
Email address: info@absolutepropertieshtx.com
Share your street address and timeline for a free consultation and a straightforward number no pressure.
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Also check out our Free Guides & Education & FAQ for more education on how to sell your house for cash quickly to a local home buyer.
