You just sold your house for cash — congratulations! Whether you sold through Cash Home Experts or another buyer, there's one thing most sellers forget to think about until it's too late: taxes.
Don't worry — it's not as scary as it sounds. Here's a straightforward guide to what you need to know.
Capital Gains 101: What You'll Owe
When you sell a property for more than you paid for it, the profit is called a "capital gain." The IRS taxes that gain, but the rate depends on a few things:
- How long you owned it: If you owned the home for more than one year, you'll pay the lower long-term capital gains rate (0%, 15%, or 20% depending on income). Less than a year? It's taxed as ordinary income.
- Was it your primary residence? If you lived in the home for at least 2 of the last 5 years, you may be able to exclude up to $250,000 in gains ($500,000 for married couples). That's a huge break.
- Inherited property: If you inherited the house, the cost basis "steps up" to the fair market value at the time of inheritance — which can significantly reduce or even eliminate your tax bill.
What Documents to Keep
After a cash sale, hold onto these records:
- The HUD-1 or closing disclosure statement
- Your original purchase documents (or appraisal at time of inheritance)
- Receipts for any improvements you made to the property
- Any 1099-S form issued at closing
These documents help your tax preparer calculate your exact gain and any deductions you're eligible for.
Pennsylvania and Philadelphia Tax Considerations
Beyond federal taxes, Pennsylvania charges a flat 3.07% state income tax on capital gains. If you're in Philadelphia, the city may also have its own tax implications depending on your situation.
This is exactly why it's worth talking to a professional who understands both state and local tax rules.
Work With a Local Tax Professional
We always tell our sellers: don't try to figure out the tax side alone. A good tax professional can save you thousands — or at least give you peace of mind that everything is filed correctly.
One firm we trust and recommend to our Philadelphia-area sellers is Asad Tax & Insurance. They're a local Philadelphia tax firm that understands real estate transactions and can walk you through everything from capital gains to deductions. If you've just sold a property — or you're planning to — they're a great resource to have in your corner.
Thinking About Selling?
If you haven't sold yet and you're exploring your options, get a free cash offer from Cash Home Experts. We buy homes as-is in Philadelphia, Bensalem, and across PA and South NJ. Learn how our 3-step process works.