Understand tax prorations, exemptions, capital gains, and what you need to disclose about property taxes when selling your home without an agent.
Start Managing Your ListingProperty taxes are one of the most misunderstood parts of selling a home, especially for FSBO sellers who don't have an agent to explain the process. The key areas you need to understand: how taxes are prorated at closing, what exemptions you'll lose, what to disclose to buyers, and how capital gains taxes affect your proceeds.
Property taxes don't stop when you sell. They're divided between you and the buyer based on the closing date:
You've already paid for the full year. At closing, the buyer reimburses you for the portion of the year they'll own the home.
Example: You paid $6,000 for the year. You close on July 1. The buyer owes you $3,000 (6 months) as a credit at closing.
You haven't paid yet for the current period. At closing, you credit the buyer for the portion of the year you occupied the home.
Example: Annual taxes are $6,000. You close on July 1. You owe the buyer $3,000 (6 months of taxes you incurred but haven't paid).
Don't worry about the math. The title company or closing attorney calculates prorations automatically. But understanding the concept helps you anticipate your net proceeds accurately.
If you have a homestead exemption (available in most states for primary residences), it reduces your assessed value and lowers your tax bill. When you sell:
Beyond regular property taxes, be aware of:
When you sell your home for more than you paid, the profit is a capital gain. The IRS provides a generous exclusion for primary residences:
| Filing Status | Exclusion Amount | Requirement |
|---|---|---|
| Single | $250,000 | Lived in home 2 of last 5 years |
| Married Filing Jointly | $500,000 | Lived in home 2 of last 5 years |
Most homeowners pay zero capital gains tax on their home sale. FSBO sellers actually benefit here: since you're not paying a listing commission (saving 2.5-3%), your profit is higher, but the exclusion still covers it.
If any of these apply, consult a tax professional before listing.
Transparent tax disclosure builds buyer confidence. Include in your Show & Disclose listing:
Show & Disclose tip: Upload your most recent tax bill to your disclosure documents. Buyers appreciate having the actual numbers rather than estimates.
Property taxes are prorated at closing based on the closing date. If you've prepaid taxes for the full year and close in June, the buyer reimburses you for the remaining 6 months. If taxes are paid in arrears and you close in June, you'll owe the buyer a credit for 6 months of taxes you lived there but haven't paid yet. The title company or closing attorney handles this calculation.
In most states, yes — the property will be reassessed at or near the sale price. This primarily affects the buyer, not you. However, some states (like California under Prop 13) have specific reassessment rules that can significantly impact the buyer's future tax bill. Disclosing the current assessed value and tax amount is standard practice.
Yes. Your homestead exemption ends when you sell and no longer occupy the property as your primary residence. The buyer will need to apply for their own homestead exemption if they plan to live in the home. The loss of your exemption doesn't affect you after the sale, but it's one reason the buyer's future tax bill may differ from what you've been paying.
While not always legally required, disclosing your current property tax amount is standard practice and builds trust. Buyers will research this anyway. Be transparent about any special assessments, pending tax increases, or supplemental tax bills. Use Show & Disclose to document all tax-related disclosures clearly.
The IRS allows you to exclude up to $250,000 in capital gains ($500,000 for married couples) if you've lived in the home as your primary residence for 2 of the last 5 years. FSBO sellers benefit here because their lower selling costs (no listing commission) don't affect this exclusion. Consult a tax professional for your specific situation.
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