Texas Capital Gains Tax: What You'll Actually Owe
There is no Texas capital gains tax. Texas has no state income tax, so a sale here is taxed at the federal level only, and that is still the layer most sellers underestimate.
Texas capital gains tax calculator
Enter your sale and see the 2026 tax in Texas: federal capital gains tax, the 3.8% net investment income tax and Texas state tax, then the same sale spread over the years the buyer pays you. It runs on the same engine as our capital gains tax calculator, in your browser. Rental property, your home, land, a business, stock or collectibles.
You keep $1,958,623 after selling costs and tax. The tax is 23.7% of your gain.
Your gain
- Sale price less selling costs$2,444,000
- Less your basis$400,000
- Your taxable gain$2,044,000
- Long-term gain at 0%, 15% or 20%$2,044,000
The tax, line by line
- Federal income tax (incl. $24,860 AMT)$410,365
- Net investment income tax (3.8%)$75,012
- Texas tax$0
- Total tax$485,377
- You keep$1,958,623
Get the REAL numbers
Talk to capital gains expert Hans Goldstein, EA.
These are estimates. Have a qualified tax professional run your real numbers in a 15-minute scope call.
Why now: the year you close and how the buyer pays you are set before closing, and they decide how much of this Texas tax you keep.
Book my 15-minute callThis is an estimate. Getting it right down to the tee takes your actual tax forms (returns, K-1s, depreciation schedules), a consult and a paid analysis. The first 15-minute scope call is free.
Worked example (computed October 13, 2026)
A married couple in Texas sells ranch land for $2,600,000 with $156,000 of selling costs and a $400,000 basis; other income is $180,000. The gain is $2,044,000. All in one year the tax is $485,377: $410,365 federal, $75,012 net investment income tax and $0 Texas tax, or 23.7% of the gain. Spread over 10 years on a note, the tax on the gain is $357,672, so they keep $127,705 more (interest on the note is taxed separately).
What applies in Texas with no state tax on the gain
federal capital gains tax (0%, 15% or 20%) plus the 3.8% net investment income tax; no state income tax and no state real estate transfer tax, though local property tax prorations and title costs still come out of proceeds.
What is the tax bill on your Texas sale going to be?
Send me the sale price and rough basis. Within one business day I'll email you the actual number and the Seller's Guide to §453. If it doesn't fit your deal, I'll tell you that plainly.
No retainer · no obligation. Hans Goldstein, a licensed insurance agent (CA Insurance License #4273294), will contact you and may discuss insurance products, including annuities.
Go deeper: the 2026 Texas capital gains guide for sellers of a business, property or farm on Big Sale Tax.
How Texas treats capital gains
Texas has no state income tax, so there is no Texas capital gains tax. Your entire exposure is federal.
Because there is no state layer, everything comes down to federal treatment. That makes the timing of the sale, the 3.8% net investment income tax and depreciation recapture the whole game.
The three layers on a Texas sale
Most sellers budget for one tax and get hit with four:
- Federal long-term capital gains at 0%, 15% or 20% depending on total taxable income for the year.
- Net investment income tax of 3.8% once modified AGI passes $200,000 single or $250,000 married filing jointly. Those thresholds are not indexed for inflation, so more sellers cross them every year.
- Depreciation recapture, if the asset was a rental or business property. The real-property portion is taxed at up to 25% as unrecaptured Section 1250 gain, and equipment is recaptured as ordinary income. See depreciation recapture.
- Texas state tax: none. Texas does not tax capital gains.
The result on a large sale is 23.8% federal, including the net investment income tax.
Why the year matters more than the rate
Every one of those layers is triggered by income landing in a single tax year. The federal rate steps from 0% to 15% to 20% based on taxable income. The 3.8% surtax switches on at a fixed threshold. For sellers 65 and older, the new $6,000 senior deduction begins phasing out at $75,000 of modified AGI ($150,000 joint) and is fully gone by roughly $175,000 ($250,000 joint), so a single large sale wipes it out completely.
Spreading the same gain across several years keeps each year's income lower, and each layer is calculated on that lower number. That is the entire mechanism behind an installment sale under IRC §453, and it is why two sellers with identical gains can pay very different totals.
Recapture is the exception: under §453(i) it is recognized in the year of sale regardless of how payments are structured.
What this actually costs: Texas numbers
Take a $500,000 long-term gain, on top of $200,000 of other income, married filing jointly.
That is roughly 24% of the gain, all federal. Texas takes nothing, so the federal timing levers are the only ones you have, and they matter more, not less.
If the asset was ever a rental or business property, add depreciation recapture: up to 25% on the real-property portion and ordinary rates on equipment.
The four layers, in the order they hit you
1. Federal capital gains. 0%, 15% or 20%, decided by your total taxable income for the year, including the gain itself. That is why one large sale lands people in the 20% bracket who normally sit far below it.
2. The 3.8% net investment income tax. Switches on above $200,000 modified AGI single, $250,000 married filing jointly. Those thresholds have never been indexed for inflation, so each year quietly captures more sellers.
3. Depreciation recapture. Only if you depreciated the asset. The real-property portion is unrecaptured Section 1250 gain at up to 25%; equipment is Section 1245 recapture at ordinary rates. The §1245 piece cannot be spread: §453(i) puts it in the year of sale. Unrecaptured §1250 gain on a building is spread with the payments.
4. Texas tax. None. Texas does not tax capital gains.
Who Texas can tax, and on what
- Real property: no Texas tax, but your home state may tax it. Texas does not tax the gain. If you live in a state with an income tax, that state generally taxes your gain on Texas property, and there is no Texas tax to credit against it.
- Everything else generally follows residency on the date of sale: business interests, stock, collectibles.
Because Texas has no income tax, there is no state withholding at closing and no non-resident return to file. Your entire exposure is federal.
Does spreading the sale help in Texas?
Yes, for federal reasons rather than state ones. There is no Texas tax to reduce, but the 3.8% surtax threshold and the step from the 15% to the 20% federal bracket are both annual tests. Spreading a $500,000 gain over five years can hold a seller in the 15% bracket and under the surtax in each of them, worth roughly $44,000 on these numbers.
An installment sale under IRC §453 spreads the gain across the years you actually receive payments, so every threshold above is tested annually instead of once.
The trade-offs deserve stating plainly: you need a buyer willing to pay over time, you carry collection risk, recapture still lands in year one, and large installment balances can trigger an interest charge under §453A. It fits some sales and not others, which is exactly what a conversation before closing is for.
Find out what your sale is really going to cost you in tax, and what you can do about it
No retainer. On a funded structure, the insurer pays a one-time commission of about 4% of the amount structured to the brokerage firm that places it (Hans’s share is about 2.4%; no trail). It is built into the annuity pricing, not a separate fee.
Find out what your tax bill actually looks like before you sell, including the parts your CPA may not raise until the return is already being prepared.
Most people find out what they owe after the sale closes, when nothing can be changed. A short conversation now tells you the number, which layers apply to your situation, and which options are still open while the sale is still in front of you.
- What you will actually owe: federal, the 3.8% surtax, recapture and your state
- Which of those layers you can still do something about
- Whether spreading the sale changes the number in your case
Hans Goldstein · 213-414-2808 · Hans Goldstein: Tax & Exit Planning · This is an educational conversation, not tax advice. Bring your CPA in before you file.
Hans Goldstein, a licensed insurance agent (CA Insurance License #4273294), will contact you and may discuss insurance products, including annuities.
Selling a house in Texas: what you'll actually owe
If you are asking how much capital gains tax Texas charges when you sell a house, the state-level answer is short: none. The real tax questions on a Texas sale sit at the federal level.
No state income tax, and no state capital gains tax
The Texas Constitution prohibits a tax on the net incomes of individuals (Article 8, Section 24-a, added in 2019). In November 2025, voters added Section 24-b, which bars a state tax on the realized or unrealized capital gains of an individual, family, estate, or trust, including a tax on the sale or transfer of a capital asset paid by the seller. That provision does not touch property tax, sales tax, or use tax.
For a Texas resident, the gain on a home sale is not taxed by the state.
No real estate transfer tax
Many states charge a tax when a deed changes hands. Article 8, Section 29 of the Texas Constitution says that after January 1, 2016, no law may be enacted that imposes a transfer tax on a transaction conveying fee simple title to real property. Prorated property taxes at closing are not a tax on your gain.
No state withholding at closing
Because Texas does not tax individual income, there is no state withholding taken out of a seller's proceeds. The one withholding rule that can apply is federal: under FIRPTA, if the seller is a foreign person, the buyer generally withholds 15% of the amount realized. An exemption applies when the price is $300,000 or less and the buyer will live in the home.
What the federal government taxes
The IRS home sale exclusion (IRC Section 121) lets you exclude up to $250,000 of gain, or up to $500,000 on a joint return, if you owned the home and used it as your residence for at least 24 months of the 5 years before the sale. You cannot use the exclusion if you already used it on another home sale in the prior 2 years. Gain above the exclusion, or gain on a rental or second home, is taxed federally.
Common mistakes Texas sellers make
- Assuming "no state tax" means no tax. Federal tax still applies to gain above the exclusion and to investment property.
- Missing the 2 of 5 year test. Selling a few months early can mean losing the federal exclusion, in whole or in part.
- Forgetting about another state. If you live in a state with an income tax when you sell, that state may tax the gain even though the house is in Texas.
- Treating a rental like a home. A property you rented out may not meet the use test, and prior depreciation is handled separately at the federal level.
Rules change and every sale is different; verify your situation with a CPA or the official Texas Constitution text at tcss.legis.texas.gov.
Worked example: a Texas home sale in 2026
Assumptions: married filing jointly, a home bought for $400,000 including improvements and sold for $1,200,000, lived in for at least 2 of the last 5 years. The $800,000 gain minus the $500,000 exclusion leaves $300,000 of taxable long-term gain, on top of $150,000 of other taxable income.
Texas has no state income tax, so the state line is zero. This is arithmetic on stated assumptions, not a projection of anyone's actual bill. For how the exclusion works when the gain runs past it, see capital gains on a home sale over the exclusion.
Frequently asked
Q: What is the Texas capital gains tax rate? A: Zero. Texas has no state income tax and therefore no state capital gains tax. Your exposure is federal only, up to 23.8% including the net investment income tax.
Q: Does Texas have a lower rate for long-term capital gains? A: There is no Texas capital gains tax at all, long-term or short-term.
Q: How do I calculate capital gains tax in Texas? A: Start with your sale price minus your adjusted cost basis, which is what you paid plus improvements minus any depreciation you took. That gain is then subject to federal capital gains rates, potentially the 3.8% net investment income tax, depreciation recapture if it was a rental, and Texas tax. The calculator on this site layers all four.
Q: Can I avoid Texas capital gains tax by moving before I sell? A: Residency changes are scrutinised closely and the facts matter a great deal, including where you lived at closing and whether the asset is real property physically located in the state. Real estate is generally taxed by the state where it sits regardless of where you live. Talk to a CPA before relying on this.
Selling something specific in Texas?
- Selling real estate in Texas
- Selling a business in Texas
- Selling a mobile home park in Texas
- Selling a self-storage facility in Texas
- Selling a dental practice in Texas
- Selling a veterinary practice in Texas
- Selling a SaaS business in Texas
- Selling an insurance book of business in Texas
Run your specific numbers
The calculator runs your sale through real 2026 federal + state tax brackets and shows §453 savings vs lump sum side-by-side.
Run the calculator → 213-414-2808