Buying a home costs more than the price tag — closing costs add thousands. And when you sell, you may owe capital gains tax — though most homeowners don't. Run both numbers below.
| Down payment | 0 |
| Loan origination ~1% of loan | 0 |
| Title insurance & escrow | 0 |
| Transfer tax | 0 |
| Appraisal, inspection, recording | 0 |
| Prepaid taxes & insurance | 0 |
| Total closing costs | 0 |
| Sale price | 0 |
| Agent commission | 0 |
| Capital gain after costs & improvements | 0 |
| Section 121 exclusion | 0 |
| Taxable gain | 0 |
| Capital gains tax | 0 |
| Net after costs & tax | 0 |
Estimates based on 2026 federal rules and typical costs. Transfer taxes, closing costs, and property tax rates vary widely by state and county. State capital gains tax and NIIT (3.8%) are not included. Confirm with your lender, title company, and a tax professional.
Buying: the costs beyond the price
Closing costs typically run 2–5% of the purchase price — on a $500,000 home, that's $10,000 to $25,000 on top of your down payment.
| Cost | Typical amount |
|---|---|
| Loan origination fee | ~1% of the loan |
| Title insurance & escrow | 0.5% + fees |
| Transfer tax | 0% to 2%+ — varies wildly by state |
| Appraisal & inspection | $500–$1,500 |
| Prepaid taxes & insurance | Several months upfront |
Transfer tax is the wild card. Some states charge nothing; New York, Pennsylvania, and Delaware can hit 2%+ (and NYC adds its own). Check your state and county before you budget.
Selling: most people owe nothing
The Section 121 exclusion. If you lived in the home 2 of the last 5 years, you can exclude $250,000 of gain (single) or $500,000 (married filing jointly). Most homeowners owe zero capital gains tax as a result.
How the gain is calculated
It's not simply "sale price minus purchase price." You subtract more than you'd think:
- Selling costs — agent commission (typically 5–6%), title fees
- Capital improvements — a new roof, kitchen remodel, addition. These raise your cost basis and shrink the taxable gain
- The original purchase price plus certain closing costs from when you bought
Keep your renovation receipts. Every dollar of capital improvement reduces your taxable gain. People routinely overpay because they can't document a decade of upgrades.
If you do owe tax
- Held over 1 year — long-term rate: 0%, 15%, or 20% depending on income
- Held under 1 year — taxed as ordinary income (much higher)
- High earners — add the 3.8% NIIT (net investment income tax)
- State tax — many states tax capital gains too
Investment properties are different
- No Section 121 exclusion — the whole gain is taxable
- Depreciation recapture — the depreciation you claimed gets taxed at up to 25%
- 1031 exchange — you can defer the tax by rolling into another investment property (strict rules and deadlines)
Budget 2–5% of the price in closing costs when buying. When selling, the Section 121 exclusion means most primary-home sellers owe nothing — but keep your improvement receipts either way.
These are estimates using 2026 federal rules and typical costs. Transfer taxes, closing costs, and property tax rates vary enormously by state and county. State capital gains tax and NIIT are not included. This is general information, not tax advice — consult a tax professional and your title company.