When you sell a home for more than you paid, the profit is a capital gain. Many homeowners owe nothing thanks to a federal exclusion, but New York prices mean more sellers go over the limit than they expect. Here’s how it works in 2026.
Step 1: Figure out your gain
Gain = sale price − selling costs − (purchase price + purchase costs + improvements)
- Selling costs include broker commission, transfer taxes, and attorney fees. Estimate them with our Transfer Tax & Seller Cost Calculator.
- Improvements are upgrades that add value or extend the home’s life, like a new roof, kitchen, or boiler. Routine repairs and painting don’t count.
- Keep receipts. Without records, improvements are hard to prove.
Step 2: Check the home sale exclusion
If the home was your primary residence, you can exclude up to $250,000 of gain ($500,000 for married couples filing jointly). To qualify, you generally must have owned the home and lived in it for at least 2 of the 5 years before the sale, and not used the exclusion on another home in the last 2 years.
If you moved early because of a job change, health, or certain other reasons, you may qualify for a partial exclusion. These limits have not changed since 1997. Congress has considered bills to raise them, but as of September 2026 the $250,000/$500,000 limits are still the law.
Step 3: Federal tax on what’s left
If you owned the home more than one year, any gain above the exclusion is taxed at long-term capital gains rates. The rate depends on your total taxable income:
| 2026 rate | Single (taxable income) | Married filing jointly |
|---|---|---|
| 0% | Up to $49,450 | Up to $98,900 |
| 15% | $49,451 to $545,500 | $98,901 to $613,700 |
| 20% | Over $545,500 | Over $613,700 |
- Owned one year or less? The gain is taxed as regular income, which is usually higher.
- Net investment income tax: an extra 3.8% can apply to taxable gains if your modified adjusted gross income is over $200,000 (single) or $250,000 (married filing jointly).
New York State and City tax
New York State taxes capital gains as regular income; there is no special lower rate. If you live in NYC, city income tax applies too. The home sale exclusion carries over to your state return, so gain that is excluded federally is generally not taxed by New York either.
Moving out of state? If you won’t be a New York resident after the sale, New York may require an estimated tax payment at closing. Your attorney handles this form, but plan for it in your numbers.
Rental and investment property
- No home sale exclusion on property you didn’t live in. For a 2–3 family where you lived in one unit, only your unit’s share may qualify.
- Depreciation recapture: depreciation you took (or could have taken) on a rental is taxed when you sell, at up to 25% federally.
- 1031 exchange: you may be able to defer the tax by buying another investment property under strict timelines. Talk to a tax professional before you list.
Quick example
A married couple bought their home for $400,000 and added a $50,000 kitchen. They sell for $1,050,000 with $70,000 in selling costs. Their gain is $1,050,000 − $70,000 − $450,000 = $530,000. After the $500,000 exclusion, $30,000 is taxable. At a 15% federal rate that’s about $4,500, plus New York income tax on the same amount.
This page is general information, not tax advice. Rates were checked in September 2026. Every situation is different, so talk to a CPA or tax attorney before you sell. We can refer you to one.
Related: Selling Timeline and Pricing Strategy Worksheet. Want to talk through your sale? Contact us.