If you're planning to sell your home in Flower Mound, you're probably thinking about timing the market, pricing your home right, and preparing it to show well. But there’s another critical question many homeowners overlook until closing is near:
Will I owe capital gains tax on the sale of my home?
If you’ve owned your home for several years—especially in a high-appreciation market like Flower Mound—there’s a good chance your home is worth significantly more than you paid for it. And while that’s good news for your equity, it may trigger tax considerations that can catch sellers off guard.
Here’s what Flower Mound homeowners need to know about capital gains when selling in 2026.
What Is Capital Gains Tax in Real Estate?
Capital gains tax is a federal tax applied to the profit you make when you sell your home for more than your cost basis.
Your cost basis is generally what you paid for the home, plus qualifying improvements.
Key Points:
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Capital gains = Selling price – Cost basis
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The gain is taxed at 0%, 15%, or 20% depending on your income level
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Only the profit is taxed, not the full sale price
✅ Takeaway: You’re only taxed on the money you made above your cost basis—and not always.
Do Texas Homeowners Pay Capital Gains Tax?
Texas has no state income tax, so homeowners here do not pay state-level capital gains tax. However, federal capital gains tax still applies.
What This Means:
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No state capital gains tax = Win for Texas sellers
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Federal capital gains rules still apply in full
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Flower Mound sellers must calculate federal gain and determine exemption eligibility
✅ Takeaway: Texas doesn’t tax your gain, but Uncle Sam might.
How Much Can You Exclude From Capital Gains?
Homeowners who meet the IRS ownership and residency requirements can exclude up to $250,000 (single) or $500,000 (married filing jointly) of gain.
To Qualify for the Exclusion:
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The home was your primary residence
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You owned and lived in it at least 2 of the last 5 years
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You haven’t used the exclusion on another home in the last 2 years
For example, if you bought your Flower Mound home in 2018 for $500,000 and sell it in 2026 for $850,000, you may be able to exclude all $350,000 of gain (if married).
✅ Takeaway: Most Flower Mound sellers qualify for full exemption—which can save you thousands.
What If You’re Selling a Rental or Second Home?
The capital gains exclusion only applies to your primary residence. Investment or vacation properties are subject to full capital gains tax.
Key Considerations:
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Rental/investment homes do not qualify for the $250K/$500K exclusion
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You may owe depreciation recapture tax if you've claimed depreciation
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A 1031 exchange can defer gains if reinvesting into another investment property
✅ Takeaway: Selling a rental? Talk to a CPA early to understand your tax exposure.
Can You Reduce Capital Gains Liability?
Yes. There are ways to reduce your capital gains tax by adjusting your cost basis and planning your sale strategically.
Tax-Saving Tips:
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Add qualifying home improvements to your cost basis (roof, kitchen remodel, etc.)
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Keep receipts and records of upgrades
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Consider selling in a low-income year to qualify for a lower tax rate
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Explore partial exclusions for unexpected life events (e.g., job relocation, health)
✅ Takeaway: Good recordkeeping can shrink your tax bill.
Who Should You Talk to Before You Sell?
Before listing your home, connect with both a real estate professional and a tax advisor.
Why It Matters:
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Your agent can help estimate sale proceeds and net after expenses
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A tax advisor or CPA can calculate potential gain and taxes owed
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You can plan ahead to avoid surprises at closing
✅ Takeaway: Don’t wait until it’s too late—understand your tax picture before you list.
FAQs
Q: Will I always owe capital gains tax when I sell my home?
A: Not necessarily. If you qualify for the $250K/$500K exemption, you may not owe anything.
Q: Does Texas charge a capital gains tax?
A: No—Texas has no state income tax, so no state capital gains tax applies.
Q: Can I reduce the gain by including home improvements?
A: Yes. Major improvements (not regular maintenance) can be added to your cost basis.
Q: What if I moved out before selling?
A: As long as you lived in the home 2 of the past 5 years, you may still qualify for the exclusion.
Selling in Flower Mound? Let’s Make Sure You Keep More of What You’ve Earned
At BlueFuse, we don’t just help you list and sell. We walk with you through the numbers, the paperwork, and the real financial decisions that can impact your future.
Before you list, let’s talk about your goals, your gain, and how to protect your equity.
Let’s build your future together.
About the Author
Brian White is a top-ranked REALTOR® and founder of the BlueFuse Group at eXp Realty, serving Flower Mound and Dallas–Fort Worth’s most sought-after suburbs. With over $200M in career sales, Brian helps sellers navigate market shifts and maximize their return through clear strategy and faith-driven service.
Want to understand what your Flower Mound home is worth? Request a private valuation or contact Brian directly:
📧 [email protected]
📞 817-646-4244
🌐 www.bluefuserealty.com
