For Sellers

Capital Gains on Your Home Sale

Estimate federal and California capital gains tax when you sell. Includes the Section 121 primary residence exclusion.

California Home Sale

Estimate your tax liability

Estimated Tax on Sale
Sale Price
Less Selling Costs
Net Sale Proceeds
Adjusted Cost Basis
Realized Gain
§121 Exclusion (Primary Residence)
Taxable Gain
Federal Capital Gains Tax
Net Investment Income Tax (3.8%)
California Income Tax
Estimated Total Tax
After-Tax Proceeds
Estimates only. Actual tax liability depends on full income picture, AMT, depreciation recapture (if applicable), state of residence, and other factors. NIIT applies above $250K MAGI joint / $200K single. Lisa M. Lum and Coldwell Banker Realty are not tax advisors. Consult your CPA before listing or accepting an offer. User assumes all risk.

California Home Sale Tax Basics

What is the Section 121 exclusion?

If the home was your primary residence for at least 2 of the last 5 years, you can exclude up to $250,000 of gain (single) or $500,000 (married filing jointly) from federal capital gains tax. This is a per-sale exclusion, not a one-time benefit, and can be claimed every two years. California conforms to this exclusion for state tax purposes as well.

Why is so much of my Peninsula gain still taxable?

Because Peninsula homes purchased 20 to 30 years ago have appreciated $2M, $5M, even $10M+. The $500,000 married exclusion is a small fraction of that. A $4M gain on a long-held Atherton or Palo Alto home leaves $3.5M taxable, often producing $1M+ in combined federal and California tax. This is why many long-time owners delay selling, gift to heirs (step-up in basis at death), or pursue a 1031 exchange on investment properties.

What counts as a capital improvement that increases my basis?

Anything that adds value, prolongs useful life, or adapts the property to new uses. Kitchen and bath remodels, additions, new roofs, HVAC replacement, landscaping, foundation work, pools, ADUs. Routine repairs (paint, fixing leaks, plumbing service) do not count. Save every receipt: a $200K addition reduces your taxable gain by $200K, saving tens of thousands in tax.

What about depreciation recapture and rental conversions?

If you converted the home to a rental at any point, prior depreciation deductions are recaptured at up to 25% federal, separate from the capital gain rate. The §121 exclusion is also prorated based on time used as a primary residence versus rental. This is one of the most commonly mismodeled scenarios. Always involve a CPA before selling a converted property.

Planning to sell a long-held Peninsula home?

Lisa works alongside your CPA to model scenarios, optimize timing, and document basis-increasing improvements before list.

Schedule a Sale Strategy Call