California taxes capital gains at 13.3%. Combined with federal taxes, your effective rate on a home sale could reach 32.1%.
CA State Rate
13.3%
Highest in nation; taxed as ordinary income
Federal Rate
15%
Most common long-term bracket
Combined Effective
32.1%
On $150K taxable gain (example)
After the $250K/$500K exclusion, here's what a typical seller might owe.
If California is where your primary residence is located and you've lived there at least 2 of the last 5 years, you can exclude up to $250K (single) or $500K (married filing jointly) of your capital gain from both federal and state taxes.
Investment and rental properties in California don't qualify for the exclusion. You'll owe 13.3% state tax plus federal tax on the full gain, plus 25% depreciation recapture on any depreciation claimed.
In California, homes sold in January sell for 11% more than those sold in August (-7%). Timing your sale right can offset a significant portion of your tax bill.
Capital gains tax rates on home sales in California and nearby states.
| State | Rate | Tax on $150K Gain | Notes |
|---|---|---|---|
Nevada0% | 0% | $0 | No state income tax |
| 2.5% | $3,750 | Flat tax rate | |
| 9.9% | $14,850 | Top marginal rate | |
CaliforniaYou | 13.3% | $19,950 | Highest in nation; taxed as ordinary income |
Selling in Nevada instead of California would save $19,950 in state tax on a $150K gain.
California imposes the highest state capital gains tax in the nation at 13.3%. The state treats capital gains as ordinary income and applies its progressive tax brackets, with the top rate hitting at income above approximately $1 million. Even the lower brackets (9.3% at $68K+) are among the highest in the country.
Proposition 19, passed in 2020, significantly changed how property tax basis transfers work in California. Homeowners over 55, disabled individuals, or victims of natural disasters can transfer their property tax base to a new home anywhere in California up to three times. This benefit can save thousands annually but does not affect capital gains tax on the sale itself.
The combination of high home prices and California's 13.3% rate creates enormous tax bills for sellers. On a $500,000 gain (common in the Bay Area and Southern California), a seller could owe $66,500 in state tax alone, plus $75,000-$100,000 in federal tax and NIIT. This makes the $250K/$500K federal exclusion critically important for California sellers.
California also imposes a mental health surcharge of 1% on income over $1 million, which effectively raises the top rate to 14.4% for very high-income sellers. Combined with federal rates, a California seller can face a combined marginal rate exceeding 37% on gains above the exclusion threshold. Many sellers work with tax professionals to time their sale across tax years or explore installment sales to manage their California tax exposure.
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