As the year winds down, a lot of East Bay homeowners start thinking about taxes, especially if they sold a home in 2026 or are planning to sell soon. This is a short, plain-English list of questions worth raising with a tax professional. To be clear up front: I am a real estate broker, not a CPA or tax advisor, and nothing here is tax advice. It is a starting point for a conversation with your own tax professional, who can apply the rules to your specific situation.
1. Do I qualify for the primary-residence capital gains exclusion?
Under Internal Revenue Code Section 121, many homeowners can exclude part of the gain from selling their main home. As a general rule, the exclusion is up to $250,000 of gain for a single filer and up to $500,000 for a married couple filing jointly, if you meet the requirements. Whether you qualify, and for how much, depends on your ownership and use of the home and your filing status. Confirm the current rules and your eligibility with your CPA.
2. Do I meet the two-of-five-year ownership and use test?
To claim the exclusion, you generally must have owned the home and used it as your primary residence for at least two of the five years before the sale. The two years do not have to be consecutive. There is also a limit on how often the exclusion can be claimed, generally once every two years. If your situation is close to these lines, that is exactly the kind of detail to review with a tax professional before you sell.
3. Which tax year will my sale fall into?
The closing date determines which tax year a sale, and any gain, is reported in. That can matter if your income differs between years or if you are timing a sale around other financial events. Whether it is better for you to close before December 31 or wait until the new year is a question for your CPA, not a rule that applies to everyone.
4. What can I add to my cost basis?
Your taxable gain is based on more than what you paid. Qualifying improvements over the years and certain selling costs can adjust your basis, which affects the gain. Homeowners often overlook this. Keep records of major improvements and ask your tax professional what counts.
5. Are there special situations that change the math?
Life events can affect how these rules apply: a home that was a rental for part of the time, a recent inheritance, a divorce, the death of a spouse, or a partial exclusion for a work or health-related move. These come up in real transactions and are exactly where professional advice earns its keep.
A note on proposed changes
There has been public discussion of proposals to change or remove the dollar caps on the home-sale exclusion. As of this writing those are proposals, not enacted law, and the long-standing $250,000 and $500,000 figures still apply. Because tax law can change, confirm the current rules with your tax professional at the time of your sale.
How I can help
My role is the real estate side: preparing a current market analysis, timing your listing, and coordinating a closing date that fits the plan you and your CPA decide on. If you are thinking about a year-end move, see selling your East Bay home during the holidays and closing before December 31. Loop me in with your tax professional and we can line up the timeline together.
Frequently asked questions
How much home-sale gain can be excluded from taxes?
As a general rule, up to $250,000 of gain for single filers and up to $500,000 for married couples filing jointly, if you meet the ownership, use, and frequency requirements. Confirm your eligibility with your CPA. This is general information, not tax advice.
What is the two-of-five-year rule?
To qualify for the primary-residence exclusion, you generally must have owned and lived in the home as your main residence for at least two of the five years before selling. The two years need not be consecutive.
Does it matter if I close in December or January?
The closing date sets which tax year the sale is reported in, which can matter depending on your finances. Whether an earlier or later close is better for you is a question for your tax professional.
Can improvements reduce my taxable gain?
Qualifying improvements and certain selling costs can adjust your cost basis, which affects the gain. Keep records and ask your CPA what qualifies.
Are the exclusion amounts changing?
There have been proposals to change the caps, but as of now they are not law and the $250,000 and $500,000 figures still apply. Confirm current rules with your tax professional.
I am Jaz Chand, licensed California Broker Associate, DRE #01751823, with The Jaz Team at Merrill Signature Properties, brand Homes With Accent. I am not a tax advisor, and this article is general information, not tax or legal advice. For your specific situation, consult a qualified CPA or tax professional. For the real estate side of a year-end move, call or text me at 925-250-9611.