Do I Need to Pay Taxes When Selling My Home in San Jose?

Do you need to pay taxes when selling your home in San Jose?

It depends on your situation. If it’s your primary residence, you may qualify for a large tax exclusion. If it’s an investment property or second home, capital gains taxes may apply—so planning ahead is key.

Understanding Capital Gains Tax

When you sell a property for more than you paid, the profit is called a capital gain. The IRS taxes that profit—but the good news is that most San Jose homeowners selling their primary residence qualify for an exclusion.

The Primary Residence Exclusion

If you’ve lived in your home for at least two of the last five years, you can exclude up to $250,000 in gains if single, or $500,000 if married filing jointly. That means most homeowners won’t owe federal taxes when selling their primary home.

Example

Let’s say you bought your San Jose home for $900,000 and sell it for $1.5 million. After deducting commissions and closing costs, your gain might be around $500,000. If you’re married and meet the residency rule, that gain could be entirely tax-free.

What If It’s an Investment Property?

If you’re selling a rental or second home, you may owe capital gains tax. The rate depends on how long you’ve owned the property—short-term gains (under a year) are taxed as regular income, while long-term gains (over a year) are taxed between 15% and 20% depending on your income level.

Can You Defer Taxes With a 1031 Exchange?

Yes. If you’re selling an investment property and reinvesting in another, a 1031 Exchange lets you defer capital gains taxes. This can be a powerful strategy for building wealth, but it has strict timing and eligibility rules—always consult a qualified 1031 intermediary.

Don’t Forget State Taxes

California also taxes capital gains as regular income. For high earners, that can mean an additional 9%–13% tax. This makes planning with both your real estate agent and tax advisor especially important.

How Kip and Tam Help Sellers Plan Ahead

Kip and Tam of The Barnard Group at Compass help San Jose homeowners prepare for every step of the selling process—including understanding potential tax impacts. They collaborate with your CPA or financial planner to help you make informed, strategic decisions before you list.

Final Thoughts

Taxes don’t have to catch you off guard. Whether you qualify for an exclusion or need to plan for capital gains, getting the right advice up front saves stress and money.Please note, this is not meant to give specific legal or tax advice. You should consult with the appropriate professionals.

Talk to Kip and Tam

Thinking about selling your San Jose home? Kip and Tam can connect you with trusted local tax professionals and guide you through what to expect.

Visit www.kipandtam.com to get started.