What You Need to Know About Capital Gains Changes in 2025
- 14 hours ago
- 5 min read
When you sell a home or an investment property, the IRS may want a piece of your profit - and that’s called capital gains tax. In 2025, the rules around these taxes didn’t change dramatically, but there are a few important updates that might affect how much you owe when you sell. Whether you’re a homeowner selling a primary residence, someone with a rental property, or just curious how taxes impact real estate profits - this guide breaks it down in simple terms.
First, What Are Capital Gains?
Capital gains are the profits you make when you sell an asset - like a house or a piece of land - for more than you paid for it.
Short-term capital gains happen if you sell the property within one year of owning it. These are taxed like regular income, which can be a higher tax rate.
Long-term capital gains kick in if you’ve owned the property longer than a year. These are taxed at lower rates (0%, 15%, or 20%) depending on how much money you make in total.
What Stayed the Same in 2025?
The basic tax rates for capital gains stayed the same (0%, 15%, or 20%).
The cutoff for what’s considered short-term vs. long-term didn’t change—so selling in less than a year still means a higher tax bill.
The home sale exemption is still available. If you’ve lived in your home for at least 2 of the last 5 years, you may be able to exclude up to $250,000 of gain if you're single, or $500,000 if you're married and filing jointly. That means you could walk away with that much profit tax-free on your primary residence.
What the “2 out of 5 years” rule means (unchanged)
To qualify for the home sale capital gains exclusion (i.e. exclude up to $250,000 if single or $500,000 if married filing jointly), you must satisfy two tests over the 5‑year period ending on the date of sale:
Ownership test - you must have owned the home for at least 2 years (these 2 years don’t need to be consecutive).
Use test - you must have lived in the home as your main residence for at least 2 years (again, not necessarily back‑to‑back).
You also can’t have used this exclusion for another home in the preceding 2 years (this is often called the “once every two years” rule).
What people sometimes misinterpret / what’s being discussed (but not changed yet)
Because home values have soared, more people are exceeding the exclusion limits, so they worry whether the 2‑year requirement should be relaxed or reworked.
Some proposals or commentary would allow more flexibility - like reducing the required years or allowing partial exclusion in special circumstances - but nothing has been adopted yet.
Some tax law changes (like the “One Big Beautiful Bill” in 2025) made sweeping adjustments elsewhere, but did not alter the 2‑year requirement for the home sale exclusion.
What Did Change in 2025?
1. Higher Income Thresholds
The government adjusts the income brackets for inflation each year, and 2025 was no exception. That means you may fall into a lower capital gains tax bracket this year even if your income stayed about the same.
For example:
If you’re single and your total income is under around $48,000, you may not owe any long-term capital gains tax at all.
Married couples with income under about $97,000 might also qualify for the 0% rate.
The 20% rate now kicks in for higher earners, starting at income above $550,000+ (for married couples).
This means your tax bill might be a little lighter if you’re near one of those threshold edges.
2. Changes That Could Impact Your Taxable Income
While the capital gains rates themselves didn’t change, the overall tax law in 2025 introduced other shifts that might affect how your income is calculated. For example:
Certain deductions and tax credits may have been revised or removed.
Your adjusted gross income could be higher or lower because of these changes - affecting which capital gains bracket you fall into.
So even if the capital gains tax rates look the same on paper, your actual tax bill could be higher or lower depending on how the rest of your income and deductions line up.
3. Changes to State-Level Capital Gains Taxes
Some states made moves to lower or eliminate their own capital gains taxes in 2025. If you own property in multiple states - or recently moved - this could be important.
For example:
A few states reduced or eliminated capital gains taxes.
Others added new taxes or surcharges for high earners or certain asset types.
For Florida residents, there’s good news: Florida doesn’t have a state income tax, so capital gains at the state level are not an issue here.
4. Updates to Business and Investment Gains
There were also updates to small business and startup stock exclusions - less relevant for home sellers, but potentially useful for anyone who has invested in real estate development companies, business partnerships, or private stock. These updates could help you exclude more of your gains in certain cases.
Why This Matters for Real Estate Owners and Sellers
If you’re planning to sell your home, investment property, or vacation home in 2025 or beyond, here’s why you should care:
Know if you qualify for the home sale exclusion - it could save you tens of thousands in taxes.
Understand your income bracket - because it affects whether your gains are taxed at 0%, 15%, or 20%.
Plan your sale timing wisely - holding a property for at least a year often saves a lot in taxes.
Factor in other income - your capital gains tax rate can change depending on your full financial picture, so talk with a CPA if you’re unsure.
The capital gains rules in 2025 haven’t seen dramatic changes, but the small updates can still make a big difference depending on your personal finances and real estate goals. Selling a property is a big deal. The more you understand about taxes ahead of time, the more strategic you can be - and the fewer surprises you'll face at tax time.
If you’re planning to sell or invest and want to better understand the financial implications, let’s talk. I can’t give legal or tax advice, but I can point you in the right direction and help connect you with trusted professionals to guide your decisions.
[DISCLAIMER:] I am not a CPA or attorney, and this content is for general informational purposes only. For specific questions about your tax situation, please consult with a licensed tax professional or attorney.
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