Guide · November 9, 2026
Taxes on a house sale: capital gains, Form 1099-S and FIRPTA
Closing costs end on closing day. Income tax on the sale comes later, with your return. The main question is whether the gain fits inside the federal home sale exclusion of $250,000, or $500,000 for a married couple.
Key points
- You may leave out up to $250,000 of gain on your main home, or $500,000 for a married couple filing jointly, if you owned and lived in it for at least 24 months of the 5 years before the sale (IRS Publication 523).
- Selling costs lower your gain. Publication 523 lists commissions, advertising, legal fees and other costs to sell.
- The settlement agent files Form 1099-S for most sales. A sale of a main home for $250,000 or less, or $500,000 for a married seller, is left out when the seller signs a written certification.
- Florida's constitution bars a state income tax on residents above what can be credited against a federal tax, so Florida residents pay no state income tax on the gain.
- A foreign seller usually has 15 percent of the price withheld by the buyer under FIRPTA, unless an exception applies.
Two kinds of tax, at two different times
Selling a house brings two separate kinds of tax. The first kind is paid on closing day and shows on the closing statement: the Florida tax on the deed, and the split of this year's property tax. The second kind is income tax on the profit from the sale, which you report on your tax return for the year of the sale.
This guide covers the second kind. It explains how the federal government works out the gain, when most or all of it is tax free, the forms that come with a sale, and how Florida and Arizona treat the gain. BIMINIO gives no tax advice. Use this guide to prepare questions for a tax adviser.
See the closing day costs in Florida and Arizona →
How the gain is worked out
The gain is what you receive from the sale minus what the house cost you. IRS Publication 523 uses two terms for this. The amount realized is the price, less your selling expenses. The adjusted basis is what you paid for the house, plus the cost of additions and improvements, with other changes the publication lists. Gain is the amount realized minus the adjusted basis.
Selling expenses lower your gain. Publication 523 lists sales commissions, advertising fees, legal fees, loan charges you paid that would normally have been the buyer's, and any other fees or costs to sell your home.
Improvements raise your basis, which also lowers your gain. The publication's examples include additions, new systems, exterior work, insulation, plumbing and interior upgrades. Repairs and upkeep generally do not count. Keep the receipts for improvements for as long as you own the house and after.
If the adjusted basis is larger than the amount realized, you have a loss. Publication 523 says you cannot deduct a loss on the sale of your main home, and you do not pay tax on the money you received.
| Step | What goes in it | Example |
|---|---|---|
| Price | What the buyer pays | $300,000 |
| Less selling expenses | Commission, advertising, legal fees, other costs to sell | $0 in a sale to BIMINIO, which pays the closing costs |
| Amount realized | Price less selling expenses | $300,000 |
| Adjusted basis | What you paid, plus improvements | $180,000 paid + $20,000 new roof = $200,000 |
| Gain | Amount realized less adjusted basis | $100,000 |
The home sale exclusion: $250,000 or $500,000
Publication 523 lets you leave out of your income the first $250,000 of gain from selling your home. The figure is $500,000 for a married couple filing jointly. You qualify if you owned the home and used it as your residence for at least 24 months of the 5 years leading up to the sale. You can take the exclusion only once in any 2-year period.
In the example above, a gain of $100,000 on a main home that meets the test is fully left out. The seller owes no federal income tax on it.
The publication has more rules for homes that were rented out, used for business, or owned for less than 2 years because of a job move, health or other events. Read the publication or ask a tax adviser if any of these apply to you.
When you must report the sale
Publication 523 says you must report the sale on your return if any of three things is true: you have a taxable gain that the exclusion does not fully cover, you received a Form 1099-S, or you choose to report the gain as taxable even though it could be excluded. If none applies, you do not need to report the sale.
A gain you report goes on Form 8949 and Schedule D. A sale with a Form 1099-S is reported on Form 8949 even when there is no taxable gain.
Form 1099-S and the written certification
Form 1099-S reports a real estate sale to the IRS. The IRS instructions put the duty to file it on the person responsible for closing. If a Closing Disclosure names a settlement agent, that agent files. A cash sale has no Closing Disclosure, so the duty falls in this order: the buyer's lawyer, then the seller's lawyer, then the title or escrow company that pays out the largest share of the price.
There is an exception for a main home. A sale of a residence for $250,000 or less, or $500,000 or less when the seller says they are married, does not need a Form 1099-S if the seller gives a written certification. In it the seller states, under penalty of perjury, that the full gain can be left out under section 121 of the tax code and that there was no period of nonqualified use after December 31, 2008. Each seller signs one. The filer may collect it up to January 31 of the year after the sale and must keep it for 4 years.
If the title company hands you a certification form, read it before you sign. If any statement in it is not true for you, tell the title company, and it will file the Form 1099-S instead.
Long-term and short-term gains
Gain that is not excluded is taxed as a capital gain. IRS Topic 409 says that if you hold an asset for more than one year before you sell it, the gain is long-term. One year or less makes it short-term, which is taxed at your regular income tax rate.
Most long-term gain is taxed at 0, 15 or 20 percent, depending on your taxable income. For tax year 2025, Topic 409 sets the 0 percent rate up to $48,350 of taxable income for a single filer and $96,700 for a married couple filing jointly. Some gains have higher top rates. Topic 409 names 28 percent for collectibles and 25 percent for unrecaptured section 1250 gain. Ask a tax adviser about these if the house was ever rented.
Florida: no state income tax on the gain
Article VII, section 5 of the Florida Constitution bars the state from taxing the income of natural persons who are residents or citizens of Florida beyond what can be credited against a similar federal or other state tax. Florida has no personal income tax, so a Florida resident pays federal income tax on a taxable gain and no Florida tax on it.
Closing day taxes still apply in Florida: the documentary stamp tax on the deed, and the split of this year's property tax.
Read the guide: seller closing costs in Florida →
Arizona: the gain is part of your state income
Arizona taxes the income of its residents, and a taxable gain from a sale is part of that income. Arizona also lets you subtract part of a long-term gain. Section 43-1022, paragraph 22, of the Arizona Revised Statutes allows a subtraction of 25 percent of the net long-term capital gain included in federal income, for an asset bought after December 31, 2011. If the date you bought the asset cannot be shown, the subtraction is not allowed.
So keep the closing statement from the day you bought the house, as well as the one from the sale. Ask a tax adviser for the Arizona rate that applies to your year.
Read the guide: seller closing costs in Arizona →
Foreign sellers and FIRPTA withholding
If the seller is a foreign person, a federal law known as FIRPTA requires the buyer to hold back part of the price and send it to the IRS. The IRS says the rate is generally 15 percent, and that in most cases the buyer is the one who withholds.
There is an exception. No withholding is needed when the price is $300,000 or less and the buyer is buying the house to live in. The IRS also describes a reduced amount for some sales between $300,000 and $1,000,000.
If you are not a US citizen or green card holder, tell the title company on the first day.
Records to keep
Your tax adviser will ask for papers from both ends of your ownership. Gather them before closing, while you still have access to the house and its files.
- The closing statement from the day you bought the house.
- Receipts and permits for additions and improvements.
- The closing statement from the sale.
- Any Form 1099-S, or the certification you signed instead.
- Records of any years the house was rented or used for business.
Taxes in a sale to BIMINIO
In a sale to BIMINIO we pay the closing costs, so they do not come out of your price. The income tax rules above are the same whoever buys the house. A BIMINIO cash offer is below full market value. Compare what you keep after every cost and every tax before you decide.
Want a number for your house? BIMINIO buys in Florida and Arizona, as is, and pays the closing costs. A written offer comes within 24 hours.