- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
California tax on property sell
I know that if I have lived in my home for at least two years in the state of California and I sold it with a gain, that I my wife and I together have an exemption from any federal income tax on the gain for up to 500k. This home was never a rental and always our primary residence. My question is about that tax on the gain for the state of California. Since we are exempt from Federal Income Tax, are we also exempt from the State of California Income Tax on any gain or is there still a tax on the gain and if so, how would it be taxed? As income tax, or as a long term capital gain tax?
Thanks for the help.

Do you have an Intuit account?
You'll need to sign in or create an account to connect with an expert.
Accepted Solutions
- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
California tax on property sell
Yes, you are missing something. And wow, did you get some erroneous advice! Don't overthink this problem. Your discussions with "Timothy" appear focused on the concept that California taxes capital gains as ordinary income. That is true. However if a capital gain is excluded from your federal Adjusted Gross Income, in most cases it does not result in taxable income for California. Timothy appears to have missed entirely your mention that the property being sold is your personal residence.
Notice a statement in one of Timothy's answers which is absolutely absurd:
"No, it would not impact the tax on your gain, if you turn around to buy another house"
That statement is an out-of-date reference to a long-since repealed federal capital gain exemption if one purchased a new home of greater value within a certain time frame. In 1997, the handling of federal capital gain on the sale of one's principal residence was changed to the current approach. Currently, subject to certain requirements the first $250,000 (and in most cases $500,000 if married filing jointly) of capital gain on the sale of a principal residence is excluded from taxation. As mentioned before, California conforms to (is consistent with) the federal provision.
Notice that due to the requirement of occupying the house as a principal residence for at least any two years out of the last five years prior to sale to qualify for the cap gain exclusion, by definition the sale results in a federal "long-term" gain on the sale, only some of which may be taxable. Also note the presumably unfair provision that while a gain may be taxable, a loss on the sale of your principal residence is not a deductible loss.
Lastly, please remember that the California income tax process begins by taking your federal Adjusted Gross Income (AGI) and your federal itemized deductions, then makes additions and/or subtractions to each as required based on differences between federal and California tax law. Any adjustments to your federal information are shown on your California Schedule CA(540), which details the various additions and subtractions, if any, to your federal data.
See the following passage on page 10 of the 2017 edition of California's FTB Publication 1001 at:
https://www.ftb.ca.gov/forms/2017/17_1001.pdf
"For sale or exchanges after May 6, 1997, federal law allows
an exclusion of gain on the sale of a personal residence in
the amount of $250,000 ($500,000 if married filing jointly).
The taxpayer must have owned and occupied the residence
as a principal residence for at least 2 of the 5 years before the
sale. California conforms to this provision. However, California
taxpayers who served in the Peace Corps during the 5 year
period ending on the date of the sale may reduce the 2 year
period by the period of service, not to exceed 18 months."
- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
California tax on property sell
- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
California tax on property sell
- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
California tax on property sell
- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
California tax on property sell
Yes, you are missing something. And wow, did you get some erroneous advice! Don't overthink this problem. Your discussions with "Timothy" appear focused on the concept that California taxes capital gains as ordinary income. That is true. However if a capital gain is excluded from your federal Adjusted Gross Income, in most cases it does not result in taxable income for California. Timothy appears to have missed entirely your mention that the property being sold is your personal residence.
Notice a statement in one of Timothy's answers which is absolutely absurd:
"No, it would not impact the tax on your gain, if you turn around to buy another house"
That statement is an out-of-date reference to a long-since repealed federal capital gain exemption if one purchased a new home of greater value within a certain time frame. In 1997, the handling of federal capital gain on the sale of one's principal residence was changed to the current approach. Currently, subject to certain requirements the first $250,000 (and in most cases $500,000 if married filing jointly) of capital gain on the sale of a principal residence is excluded from taxation. As mentioned before, California conforms to (is consistent with) the federal provision.
Notice that due to the requirement of occupying the house as a principal residence for at least any two years out of the last five years prior to sale to qualify for the cap gain exclusion, by definition the sale results in a federal "long-term" gain on the sale, only some of which may be taxable. Also note the presumably unfair provision that while a gain may be taxable, a loss on the sale of your principal residence is not a deductible loss.
Lastly, please remember that the California income tax process begins by taking your federal Adjusted Gross Income (AGI) and your federal itemized deductions, then makes additions and/or subtractions to each as required based on differences between federal and California tax law. Any adjustments to your federal information are shown on your California Schedule CA(540), which details the various additions and subtractions, if any, to your federal data.
See the following passage on page 10 of the 2017 edition of California's FTB Publication 1001 at:
https://www.ftb.ca.gov/forms/2017/17_1001.pdf
"For sale or exchanges after May 6, 1997, federal law allows
an exclusion of gain on the sale of a personal residence in
the amount of $250,000 ($500,000 if married filing jointly).
The taxpayer must have owned and occupied the residence
as a principal residence for at least 2 of the 5 years before the
sale. California conforms to this provision. However, California
taxpayers who served in the Peace Corps during the 5 year
period ending on the date of the sale may reduce the 2 year
period by the period of service, not to exceed 18 months."
- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
California tax on property sell
source removed- out of date information"
(reason 422 why I'm not moving to CA)
- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
California tax on property sell
- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
California tax on property sell
California conforms to the requirements, exemptions, and limits embodied the federal regulations.
- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
California tax on property sell
I am selling my personal residence in California. I have lived in it for more than two years. The gain is less the 100K so I know that I am exempt from Federal tax on this, but was wondering what the California tax would be on this gain. Thanks for the help.
Mike • 1:57 PM
You are now chatting with Timothy
Hello. This is Timothy at Station Number # 2124.
Timothy • 1:58 PM
Hello
Mike • 1:58 PM
Is this a gain or loss?
Timothy • 1:59 PM
Gain
Mike • 1:59 PM
Hello?
Mike • 2:00 PM
California does not have any special tax rates on capitol gains, capitol gains is treated as normal income so it would be subject to the normal tax rate of income earn in California
Timothy • 2:01 PM
So there is no exemption as there is for Federal Tax in regards to any gain in selling a residential property?
Mike • 2:02 PM
What if I use the gain to purchase another residential property, does this have an impact on the tax?
Mike • 2:03 PM
Capital gains are taxed at the same rate as ordinary incomeregardless of the holding period of the asset.
Unlike federal law, California treats capital gains as ordinary income and does not give favorable lower rates to capital gains. The amount of California tax is not dependent on the holding period because there is no distinction between long-term and short-term capital gains.
Timothy • 2:03 PM
No, it would not impact the tax on your gain, if you turn around to buy another house
Timothy • 2:04 PM
Ok. I appeciate your help with this. To make sure I understand this correctly if my gain was 50,000 and my AGI was 100,000 for California, then the 50,000 gain would be stacked on top of the 100,000 AGI and taxed according to the State Income Tax Rate. Is that correct in a simplified way?
Mike • 2:05 PM
That is correct, you understand it [Edit added 04/20/18 by a SuperUser ... Wrong! That is NOT correct.]
Timothy • 2:07 PM
Great. Thanks for the help. California is making it harder and harder to live here! :-). Is there a way for me to print this out for my future reference?
Mike • 2:07 PM
No, but you can copy then paste this chat into MS Word or Note Pad to save then print out
Timothy • 2:08 PM
Very good that is what I will do. Thanks.
Mike • 2:08 PM
If you have no further questions, I will disconnect this chat in 2 minutes. Once the session is closed you will not have access to the chat
Timothy • 2:08 PM
- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
California tax on property sell
Thankfully I believe this operator is clearly wrong, based on this article on FTB's website. It basically says, yes they do the exemption as IRS:
https://www.ftb.ca.gov/file/personal/income-types/income-from-the-sale-of-your-home.html
There is very little on the web about this issue, so thank you Mike and Stanford guy for this super helpful discussion.
- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
California tax on property sell
This was an old answer that was brought over from the old turbotax site in June of this year. If the link ever worked tax law changes and other situations are no longer valid information. I intended only to link to a source. I will remove the link so future 2019 will not be compromised.
- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
California tax on property sell
Hi Bees, thanks for your comment, though I'm confused as to what you're saying. Which link are you talking about? The link to this thread conversation?
In case it helps for you to know, this thread page is currently the *top* number one Google hit if you search for "California tax on sale of principal residence" -- so it's quite an important page and very visible for anyone who is trying to figure out whether they will need to pay state taxes on the sale of their California home. I'm guessing it gets a lot of internet traffic as a result and people are taking the answers to heart. CalConnect's answer seems actually very accurate and well argued as well as still relevant today.
- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
California tax on property sell
Hey guys, hopeful thinking here perhaps... IF I lived in the home 2 of 5 years preceding sale, therefore qualifying for the exclusion, BUT I moved from California a year or two before the property sale, let's say I'm a resident, now, of Tennessee, THEN the taxable portion of the gain on sale of property LOCATED IN CA triggers me to file a CA nonresident return, paying CA tax on the taxable gain? Or I just happily file in TN and no CA tax due on that transaction cuz I'm no longer a resident? I suspect wishful thinking, but maybe....! Many thanks.
- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
California tax on property sell
Ca sourced income will be taxed by CA.
**Mark the post that answers your question by clicking on "Mark as Best Answer"
- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
California tax on property sell
As an addendum to this thread, can a married couple take advatage of the $500k capital gain tax exemption upon sale of their primary residence when one of them only is listed on the home's title?
I bought our home over a decade ago and have lived in it continously as primary residence. Upon our marraige over 5 years ago, my spouse joined me in the home, though the title is still in my name. No other property sales have occured in over a decade. And does the answer apply both at the Federal level and in California?
Thank you in advance for your reply.
Still have questions?
Questions are answered within a few hours on average.
Post a Question*Must create login to post