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Most homeowners do not pay any federal tax when they sell their primary residence in Las Vegas. If the home was your main residence for at least two of the last five years, you can exclude up to $250,000 of profit if you are single, or up to $500,000 if you are married filing jointly. Nevada has no state income tax, so there is no state capital gains tax either. You only owe federal capital gains tax on profit above the exclusion amount. Here is exactly how it works.
Do I pay taxes to the IRS when I sell my house?
Only if your profit is larger than your exclusion. The IRS lets you exclude a big chunk of the gain on your primary home under Section 121 of the tax code. For a single filer that is up to $250,000 of profit, and for a married couple filing jointly it is up to $500,000. If your gain is under that limit and you meet the requirements, you owe no federal tax on the sale.
How does the capital gains exclusion work?
To qualify for the full exclusion, you generally need to pass two tests for the five years before the sale:
- Ownership test. You owned the home for at least two of the last five years.
- Use test. You lived in the home as your main residence for at least two of the last five years.
The two years do not need to be continuous, and there is a frequency rule that generally limits you to using the exclusion once every two years. Your gain is your sale price minus what you paid plus the cost of major improvements, not simply the full sale price. That distinction matters, because improvements you made over the years reduce your taxable gain.
How much capital gains tax will I pay on a large profit?
You only pay on the profit above your exclusion. For example, a married couple with a $400,000 gain on their primary home would owe nothing federally, because $400,000 is under the $500,000 limit. If that same couple had a $600,000 gain, only $100,000 would be potentially taxable. Long-term capital gains rates are generally 0, 15, or 20 percent depending on your income. Because Nevada has no state income tax, there is no additional state capital gains tax on a Las Vegas home sale.
Do I have to report the sale to the IRS?
Sometimes. If you receive a Form 1099-S at closing, or if your gain is more than the exclusion you qualify for, you report the sale on your tax return using Schedule D and Form 8949. If your entire gain is covered by the exclusion and you do not get a 1099-S, you often do not have to report it at all. When in doubt, report it.
How does the IRS know if I sell my house?
The title or escrow company may file a Form 1099-S with the IRS reporting the sale, and that information is matched to your return. This is one reason it is smart to keep good records of your purchase price and improvements, so you can document your actual gain if the IRS ever asks.
Does profit from selling your house count as income?
The portion of profit covered by the exclusion is not counted as taxable income. Any gain above the exclusion is taxed as a long-term capital gain, not as ordinary wage income, as long as you owned the home for more than a year. For most Las Vegas homeowners selling a primary residence, the sale has no impact on their taxable income at all.
The bottom line for Las Vegas sellers
If you are selling the home you have lived in, you very likely owe no federal tax thanks to the $250,000 or $500,000 exclusion, and Nevada adds no state income tax on top. The picture is different for investment properties, second homes, or a home you have owned a short time, so those situations deserve a closer look. This article is general information and not tax advice. Confirm your specific numbers with a CPA before you file.
Thinking about selling and want to know your number first? Get a free estimate with our home valuation tool, then read our full guide to selling a home in Las Vegas. When you are ready, tell us about your home or schedule a consultation.
The Arbeli Team, Signature Real Estate Group. Amy Arbeli and Tzahi Arbeli. Call or text (702) 210-8725. This content is for general information only and is not tax or legal advice.
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