Do You Owe Taxes When Selling Your House for Cash in Texas?

The Welcome News: Texas Imposes No State Income Tax

Texas stands among nine states that levy no state income tax whatsoever. This means you will owe nothing at the state level on your home sale proceeds, regardless of the profit margin. Your only tax consideration is at the federal level.

Federal Capital Gains Exclusion

If you occupied the property as your primary residence for at least two of the preceding five years, you qualify for the federal capital gains exclusion: $250,000 for individuals filing single and $500,000 for married couples filing jointly. For the vast majority of Allen homeowners, this translates to zero federal tax on the sale. As an illustration, if you purchased your home at $150,000 and sell for $350,000, your $200,000 gain falls comfortably beneath the $250,000 threshold.

Inherited Property and the Stepped-Up Basis

If you received the property through inheritance, the cost basis receives a "step-up" to the fair market value as of the decedent's date of death. This mechanism frequently eliminates capital gains entirely. If a parent acquired the home for $50,000 in 1980 and it was valued at $300,000 at the time of their passing, your basis resets to $300,000. Selling at that price produces a gain of $0.

Investment Property and Short-Term vs. Long-Term Gains

For investment or rental properties, the primary residence exclusion does not apply. Short-term gains on assets held under one year are taxed at ordinary income rates. Long-term gains on holdings exceeding one year are taxed at preferential rates of 0%, 15%, or 20% based on your income bracket. Investors may also explore a 1031 exchange — a strategy that defers capital gains taxation by reinvesting proceeds into a qualifying like-kind property.

Professional Tax Guidance Is Essential

Every tax situation is unique. We are not licensed tax advisors. We strongly encourage consulting with a CPA or qualified tax professional to fully understand your specific obligations before finalizing a sale. They can provide guidance on optimal timing strategies, applicable exemptions, and available deductions.

Have additional questions? Visit our FAQ page or request your cash offer today.