Updated October 7, 2026. Quick answer: Generally no, under Pennsylvania’s own rule rather than the federal exclusion. The Department of Revenue says owners who “qualify for exclusion of the gain from the sale” of a principal residence leave it out of Pennsylvania taxable income, and a gain that does not qualify is taxed at “levied at the rate of 3.07 percent against taxable income”. The state realty transfer tax is 1 percent.
Pennsylvania tax on home sale profit at a glance
| Item | What the documents say |
|---|---|
| Profit on your main home | Does not follow IRC 121 by name: Pennsylvania’s own four-part rule (owned and used as principal residence two of the five years before the sale, no other residence sale in the prior two years unless the sale follows an unforeseen change in employment, health or severe financial hardship) |
| Rate on gain above the exclusion | Flat: 3.07 percent |
| Collected at the sale | 1 percent state realty transfer tax, grantor and grantee jointly liable; local tax often added; no resident withholding shown |
| Source | PA Department of Revenue |
What the Pennsylvania documents say
The Department’s page on the sale of your principal residence says a gain qualifies for exclusion if you owned and used the home as your principal residence for at least two of the five years before the sale. The Department’s Form REV-625 lists four requirements: a sale after December 31, 1997, use as the principal residence for a total of at least two years in the five years before the sale, ownership for a total of at least two years in the same period, and no sale of another principal residence in the two years before. It adds that gain or loss is reported on PA Schedule D: “Gain or loss is reported on PA Schedule D.” A gain that does not qualify is calculated on the PA-19 worksheet for a taxable sale of a principal residence.
The Department’s personal income tax page gives the rate, a flat tax “levied at the rate of 3.07 percent against taxable income”. Pennsylvania does not refer to the federal section 121 limits on that page, so this page does not assume the $250,000 and $500,000 dollar caps carry over.
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 Pennsylvania sells their main home with a gain of $400,000. If they meet the Department’s four requirements, the Department’s page says the gain qualifies for exclusion, so $0 of it is taxed by Pennsylvania. If they failed a requirement, the gain could be taxable at the flat rate, which would be, computed as $400,000 times 3.07 percent, $12,280, although the Department says a sale made because of an unforeseen change in employment, health or severe financial hardship can still qualify for the exclusion, and a home used partly for other purposes may exclude the residential portion. Local taxes are outside this page.
What is collected at the sale
The Department’s Realty Transfer Tax page says the state tax is “imposed at a rate of 1 percent on the value” of real estate transferred, and “Both grantor and grantee are held jointly and severally liable”. Local realty transfer tax is often collected in addition. The documents read show no income tax withholding on a Pennsylvania resident’s sale.
What changes in 2026
The documents read for Pennsylvania 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 Department’s page does not state a dollar cap on the exclusion, and the page read is undated. The documents read cite no statute. The rate is the current flat rate on the Department’s page, which this page applies to the illustration without a year.
Common mistakes
- Assuming the federal $250,000 and $500,000 caps are Pennsylvania’s rule; the Department’s page describes its own four requirements and states no dollar cap.
- Forgetting the 1 percent state realty transfer tax and the local tax that is often added.
- 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 Pennsylvania taxes capital gains, Pennsylvania retirement taxes, and home sale exclusion calculator.
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Answer againSources
- Sale of Your Principal Residence and PA Personal Income Tax Implications (REV-625): https://www.pa.gov/content/dam/copapwp-pagov/en/revenue/documents/formsandpublications/formsforindividuals/pit/documents/rev-625.pdf
- Personal Income Tax: https://www.pa.gov/agencies/revenue/resources/tax-types-and-information/personal-income-tax
- Realty Transfer Tax: https://www.pa.gov/agencies/revenue/resources/tax-types-and-information/realty-transfer-tax
- PA Personal Income Tax Guide: Net Gains (Losses) from the Sale, Exchange, or Disposition of Property: https://www.pa.gov/content/dam/copapwp-pagov/en/revenue/documents/formsandpublications/papersonalincometaxguide/documents/pitguide_netgainssaleexchngdispprop.pdf
- 26 U.S.C. 121, Exclusion of gain from sale of principal residence (U.S. Code, GovInfo): https://www.govinfo.gov/content/pkg/USCODE-2023-title26/html/USCODE-2023-title26-subtitleA-chap1-subchapB-partIII-sec121.htm
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.