Selling a House in Nevada: Taxes and Capital Gains
Most Las Vegas sellers owe nothing. Here is why, who the exceptions are, and the paperwork worth finding before you list.
Nevada Takes Nothing
Start here, because it is the biggest single fact.
Nevada has no state income tax, which means no state capital gains tax on the sale of your home. Whatever you owe when you sell here, you owe it to the IRS and nobody else.
That is a real number, not a talking point. A seller with the same gain in California could face a state bill on top of the federal one at rates well into double digits. In Nevada that entire layer is simply absent.
What you will still see on your settlement statement are Nevada’s real estate transfer tax and the usual closing costs. Those are transaction costs, not income tax, and they are covered in my page on seller closing costs.
The Federal Exclusion Covers Most Sellers
Section 121, and it is generous.
If the home was your primary residence, you can generally exclude up to $250,000 of gain from federal tax as a single filer, or up to $500,000 married filing jointly. To qualify you must have owned the home and lived in it as your main home for at least two of the five years before the sale.
The two years do not have to be consecutive. You also generally cannot use the exclusion more than once every two years.
The exclusion applies to gain, not sale price. Gain is what you sold for minus your adjusted cost basis and your selling costs. That is a much smaller number than the check at closing, which is why so many sellers who expect a tax bill do not get one.
Your Cost Basis Is Where the Money Is
This is the part sellers cost themselves on.
Your basis starts at what you paid for the home, then goes up with capital improvements. Every dollar you add to basis is a dollar of gain that never exists. Most people simply never kept the receipts.
Generally adds to basis
A new roof, a pool, an addition, replacement windows, a full kitchen or bath remodel, new HVAC, solar, landscaping build out.
Generally does not
Routine repairs and maintenance. Fixing a leak is a repair. Replacing the roof is an improvement.
Also reduces gain
Selling costs, including commissions, title and escrow fees, and transfer tax, come off the top.
Start the folder now
If you plan to sell in the next few years, gather receipts and permits while you can still find them.
Who Actually Gets a Bill
Four situations where this stops being simple.
Long tenured single filers
If you bought a long time ago and file single, $250,000 of appreciation is not hard to exceed in this valley. The excess is taxable.
The home was ever a rental
Depreciation you claimed gets recaptured and is taxed separately, at a federal rate up to 25 percent, even if the rest of your gain is excluded.
Investment property
There is no primary residence exclusion on a rental or a flip. A 1031 exchange can defer the tax, but it has strict deadlines and must be set up before you close.
You did not meet the two year test
Selling too soon usually means no exclusion, though partial relief exists for certain job, health, and unforeseen circumstance moves.
I am a Realtor, not a CPA. This page is general information to help you ask better questions. If your gain is anywhere near the exclusion limits, or the property was ever rented, talk to a Nevada tax professional before you sign a listing agreement, not after you close.
The sellers who get surprised are almost never the ones who asked early. Have the tax conversation before you list, not at closing.
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Common Questions
Tap any one to open it.
Do you pay capital gains tax when you sell a house in Nevada?
Not to the state. Nevada has no state income tax and therefore no state capital gains tax. Federal capital gains tax still applies, but the Section 121 exclusion shields up to $250,000 of gain for single filers and $500,000 for married couples filing jointly on a primary residence, which covers most sellers entirely.
How long do I have to live in the house to avoid the tax?
You generally need to have owned it and used it as your main home for at least two of the five years before the sale. Those two years do not need to be consecutive. If you sell sooner, you may still qualify for a partial exclusion in certain circumstances such as a work relocation, a health issue, or other unforeseen events.
What if I rented the house out for a while?
It gets more complicated. Any depreciation you claimed during the rental period is recaptured and taxed separately at a federal rate up to 25 percent, regardless of the exclusion. Periods of non qualified use can also reduce how much of your gain is excludable. This is a situation where a CPA earns their fee.
Does the exclusion apply to the sale price or the profit?
The profit. Gain is what you sold for, minus your selling costs, minus your adjusted cost basis. Basis is your purchase price plus capital improvements over the years. Sellers routinely overestimate their gain because they forget to add improvements to basis.
What about selling an investment property?
There is no primary residence exclusion available on an investment property. Federal capital gains apply to the full gain, plus depreciation recapture. A 1031 exchange lets you defer the tax by reinvesting into like kind property, but the timelines are strict and the exchange has to be arranged before your sale closes, not after.
Does Nevada have a transfer tax when I sell?
Yes, Nevada charges a real property transfer tax at recording, and it appears on the settlement statement. That is a transaction cost rather than an income tax, and it is separate from anything discussed above. It shows up alongside your other selling costs.
Let’s Talk About Your Net
Price is only half of it. Let’s look at what you would actually walk away with, and what to gather now so your accountant has what they need later.
Keep Reading
The pages sellers open next.
Lori Ballen
I’ve lived in Las Vegas since I was five years old and I have walked a lot of sellers through this conversation. I am not your CPA, but I can tell you what to ask them. Email me at lori@loriballen.com.
702-604-7739