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Does California Tax Profit From Selling Your Home? (2026)

Updated October 7, 2026. Quick answer: Generally no, if you qualify for the federal exclusion. FTB Publication 1001 says federal law allows a $250,000 ($500,000 if married filing jointly) exclusion and that “California law conforms to this provision”. Any gain above it is taxed as regular income, and “must withhold the full 3 1/3% (.0333) of the sales price” at closing unless you certify a principal-residence exemption.

California tax on home sale profit at a glance

ItemWhat the documents say
Profit on your main homeFollows the federal exclusion: the Franchise Tax Board says California law conforms
Rate on gain above the exclusionTaxed as regular income; the 2025 schedules reach 12.30%
Collected at the saleForm 593: escrow withholds 3 1/3% of the sales price unless you certify a principal residence
SourceCalifornia Franchise Tax Board

What the California documents say

FTB Publication 1001 notes that federal law allows an exclusion of $250,000 ($500,000 if married filing jointly) of gain on the sale of a personal residence, and says “California law conforms to this provision”. The 2025 Form 540 booklet explains the rate side: “California taxes long and short term capital gains as regular income”, so gain above the exclusion is added to your other income and taxed at the graduated rates, which reach 12.30% in the 2025 schedules.

The state reports the gain on Schedule D (540) and adjusts for differences on Schedule CA (540), line 7a.

What the federal exclusion requires

Most state answers start here. The statute says “Gross income shall not include gain from the sale or exchange” of property that, during the five years before the sale, you owned and used as your principal residence for periods adding up to two years or more. The limit is “shall not exceed $250,000”, or $500,000 for a husband and wife who make a joint return and meet the statute’s conditions. See CMG’s home sale taxes page and exclusion calculator.

A worked example at a $400,000 gain

An illustration, not a return: a married couple in California sells their main home with a gain of $400,000 and meets the federal ownership and use tests. The gain is below the $500,000 joint exclusion, so $0 of it is taxable federally, and because California conforms, $0 is taxed by California. As a second illustration, computed below, suppose the gain were $600,000. The amount above the exclusion would then be $100,000, added to other income and taxed at California’s graduated rates; the Franchise Tax Board schedule, not this page, gives the tax.

What is collected at the sale

When California real estate is sold, the escrow person withholds. The Form 593 instructions say the escrow person “must withhold the full 3 1/3% (.0333) of the sales price” unless the seller qualifies for an exemption. The form lets the seller certify that the property is the seller’s “principal residence under Internal Revenue Code (IRC) Section 121”, and the instructions say withholding is not required when “The sales price is $100,000 or less”. Withholding is a prepayment credited against the tax you owe, not an extra tax.

What changes in 2026

The documents read for California announce no change for 2026 that is specific to the tax on a home sale. The forms and instructions read are for tax year 2025 or the newest page archived; check the state agency for 2026 forms when they are published.

What the documents do not say

  • The conformity statement comes from FTB Publication 1001; the California statute itself was not archived. The rate schedules read are for 2025. The Form 593 exemption depends on the property being your principal residence in the sense of section 121.

Common mistakes

  • Treating the 3 1/3% Form 593 withholding as the tax owed; it is a prepayment against your return, and a certified principal-residence exemption removes it.
  • Assuming California taxes home-sale gain at a lower capital gains rate; the Franchise Tax Board says it taxes long term gains as regular income.
  • Assuming the answer for one state applies to another, or that the state answer changes the federal tax on the sale.

Related: home sale taxes, state tax on home sale profit, how California taxes capital gains, California retirement taxes, and home sale exclusion calculator.

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Sources

Sources: the primary documents linked above, read on October 7, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.

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