Yes, first you can deduct sales expenses from the selling price. That means real estate commission, and any taxes and legal fees that are commonplace in your market. (For example, if the seller pays for the building inspection, or the seller pays a transfer tax or deed recording fees.) So your gain is lower.
Second, your gain is not affected by what you owe. If you bought for $150K and still owed $135K, then you probably refinanced at some point, which is money you weren't taxed on when you took the loan. Or maybe you bought with zero down, which means you had money in your pocket all these years to do other interesting things with.
And finally, don't forget your profit over the years.
