Talk to a Tax Pro: What Sellers in DC Should Know About Capital Gains
What should Washington DC home sellers know about capital gains taxes? If you’re preparing to sell your home, one of the most important tax questions is whether you’ll owe capital gains on your profit—and how much. The good news? Many sellers in DC, Maryland, and Virginia qualify for a significant tax exclusion.
In this blog, local Realtor Dan Wheeler shares what every home seller should understand about capital gains, how they’re calculated, and
why it’s crucial to speak with a licensed tax professional before you sell.
Disclaimer: This blog is for informational purposes only and should not be considered legal or tax advice. Always consult with a certified tax advisor or CPA.
What Are Capital Gains?
Capital gains are the profit you earn when you sell an asset for more than you paid for it. In real estate, this means:
Sale Price – (Purchase Price + Selling Costs + Home Improvements) = Capital Gain
If you’ve owned and lived in the home as your primary residence, you may qualify to exclude some—or all—of that gain from federal taxation.
Do DC Home Sellers Pay Capital Gains Taxes?
It depends. If your profit exceeds the IRS’s capital gains exclusion threshold, you may owe taxes on the portion above the exemption.
Current IRS Capital Gains Exclusion Limits:
- $250,000 for single taxpayers
- $500,000 for married couples filing jointly
To qualify, you must:
- Own the home for at least two years out of the last five
- Use the home as your primary residence for those same two years
Example: If you bought your home in Capitol Hill for $500,000 and sell it for $900,000, your $400,000 gain could be fully excluded if you’re married and meet the two-year test.
What Reduces Your Taxable Gain?
Capital gains are calculated after subtracting qualified costs:
- Real estate agent commissions
- Title and escrow fees
- Marketing and staging expenses
- Home improvements made during ownership (not routine maintenance)
All of these count toward your adjusted basis in the property, reducing your profit.
Dan’s Tip: Keep receipts and records from your home purchase, improvements, and sale to ensure you can back up your deduction claims.
Capital Gains and Second Homes or Rentals
If the home was not your primary residence—such as a second home or rental—the capital gains exclusion does not apply.
In those cases, your entire gain is taxable, and you may also owe depreciation recapture tax on any depreciation claimed during ownership.
You might be eligible for a 1031 exchange to defer capital gains, but this only applies to investment properties and must follow strict IRS rules.
State-Level Capital Gains Considerations
In addition to federal taxes, you may owe capital gains taxes to your state:
- DC: Taxes capital gains as regular income
- Maryland and Virginia: Include capital gains as part of your state income
Your total tax owed will depend on your income bracket and filing status.
Why You Need a Tax Professional
While Dan Wheeler can help you price and sell your home, only a tax professional can:
- Calculate your exact capital gain
- Determine your exclusion eligibility
- Help you document deductible expenses
- Ensure compliance with state and IRS rules
Don’t wait until tax season. Consult with a tax expert before you list, so you know what to expect.
Final Thoughts: Get Strategic Before You Sell
Selling a home in Washington DC, Maryland, or Virginia can come with a major tax benefit—or a hefty tax bill. Understanding how capital gains work and talking to a tax advisor early in the process helps you plan ahead and protect your equity.
Dan Wheeler works with trusted CPAs, attorneys, and title professionals to give his clients peace of mind through every step of the transaction.
