What taxes does California impose on the sale of a house?

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Casey Epton, CPA, is a Senior Tax Advisor at Deduction, where he helped design Taylor, CPAI from day one, building an AI tax agent that works seamlessly for both clients and the CPAs who verify every return.

Last updated:

Sep 2026

California imposes several potential taxes when you sell a house, though many homeowners may owe little or nothing depending on their circumstances.

1. California State Income Tax on Capital Gains

Key Point: California taxes capital gains as ordinary income

Unlike the federal government, California does not have preferential tax rates for long-term capital gains. Any taxable gain from selling a house is added to your ordinary income and taxed at California's progressive income tax rates, which range from 1% to 13.3% (2024/2025).

Additionally, if your taxable income exceeds $1,000,000, an extra 1% Behavioral Health Services Tax (previously Mental Health Services Tax) applies, bringing the maximum rate to 14.4%.

2. Primary Residence Exclusion

California conforms to the federal IRC Section 121 exclusion for the sale of a principal residence. According to the California Franchise Tax Board:

Single Filers: You do not have to report the sale if all of the following apply:

Your gain from the sale is not more than $250,000
You owned and used the home as your principal residence for at least 2 of the 5 years before the sale
During the 2-year period ending on the date of sale, you did not exclude gain from the sale of another home

Married/RDP Couples Filing Jointly: You can exclude up to $500,000 if:

Either spouse meets the 2-year ownership test
Both spouses meet the 2-year use test
Neither spouse excluded gain from another home sale in the past 2 years

Any gain exceeding the exclusion amount is taxable. If you qualify for the exclusion and your gain doesn't exceed the limit, you don't need to report the sale on your California return.

3. Real Estate Withholding

California requires withholding at the close of escrow on real estate sales. This is a prepayment of income tax, not an additional tax.

Standard Withholding Rate: 3⅓% (0.0333) of the sales price

Alternative Withholding Calculation: Sellers can elect to have withholding calculated based on the estimated gain multiplied by their applicable tax rate.

Exemptions from Withholding (no withholding required if):

The property qualifies as your principal residence under IRC Section 121
The property was last used as your principal residence
You have a loss or zero gain on the sale
The transaction is a 1031 like-kind exchange
Other specific exemptions apply

If withholding exceeds your actual tax liability, you receive a refund when you file your California income tax return.

4. Documentary Transfer Tax (County & City)

This is a transfer tax imposed at recording when ownership changes.

County Rate (Statewide): $1.10 per $1,000 of sales price (or $0.55 per $500)

Example: A home sold for $800,000 would owe $880 in county documentary transfer tax.

City Transfer Taxes: Many California cities impose additional transfer taxes that vary significantly:

City	City Tax Rate (per $1,000)	Total with County
Most cities	$0.55	$1.10
Los Angeles	$4.50	$5.60
Santa Monica	$3.00	$4.10
San Francisco	$7.50+ (tiered)	$7.50+
Oakland	$15.00+ (tiered)	$16.10+
Culver City	$4.50	$5.60

Some cities have adopted tiered rates where higher-priced properties pay significantly more. For example, Los Angeles added Measure ULA in 2023, imposing a 4% tax on sales over $5 million and 5.5% on sales over $10 million.

Documentary transfer tax is typically negotiable between buyer and seller as to who pays.

Summary: Potential Taxes on a California Home Sale

Tax Type	Rate / Amount	Who Pays	Notes
State Capital Gains Tax	1% – 14.4% of taxable gain	Seller	Taxed as ordinary income
Primary Residence Exclusion	Up to $250K (single) / $500K (married)	N/A	Must meet ownership and use tests
Real Estate Withholding	3⅓% of sales price (or based on gain)	Withheld from seller	Prepayment of income tax; exemptions available
County Transfer Tax	$1.10 per $1,000	Negotiable	Statewide rate
City Transfer Tax	$0 to $30+ per $1,000	Negotiable	Varies widely by city

Example Calculation

Scenario: A married couple sells their primary residence in Los Angeles for $1,500,000. They purchased it 10 years ago for $600,000 and have $50,000 in selling expenses.

Gain: $1,500,000 - $600,000 - $50,000 = $850,000
Taxable Gain (after $500,000 exclusion): $350,000
Estimated CA State Tax: $350,000 × ~9.3% (estimated marginal rate) = ~$32,550
Real Estate Withholding: Exempt (principal residence)
County Transfer Tax: $1,500,000 × 0.0011 = $1,650
City Transfer Tax (LA): $1,500,000 × 0.0045 = $6,750
Total Transfer Tax: $8,400

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