When exactly do I pay Capital Gains Tax after selling my home? Timing questions

The confusion here is understandable! Your tax person is correct - capital gains tax from selling your home is reported and paid when you file your tax return for the year in which you sold the property. What your realtor might be referring to is FIRPTA withholding, which is only applicable if you're a foreign person selling US property. Or they could be talking about property tax prorations that happen at closing. Neither of these are capital gains tax. Since you're selling before the 1-year mark, your gain will be taxed as a short-term capital gain (at your ordinary income tax rate). You'll receive a closing statement after your home sale that shows your proceeds. You'll need to determine your "basis" (what you paid plus qualifying improvements) to calculate your actual gain. This information gets reported on Schedule D of your tax return when you file for 2025 (assuming you sell in 2025). You generally don't need to make any special estimated tax payments unless your expected tax bill is going to be large. With a small profit like you mentioned, it's unlikely you'd need to make an estimated payment, but your tax professional can confirm based on your specific situation.

I went through something similar last year and was super confused about the timing too. I found this amazing tool called taxr.ai (https://taxr.ai) that helped me figure out exactly what I needed to pay and when. I uploaded my closing documents and purchase records, and it analyzed everything for me. The tool confirmed what the first commenter said - you pay capital gains when you file your taxes for the year you sold the house. But what was really helpful was that it calculated my actual gain after factoring in all my eligible improvements and selling costs. I had a bunch of receipts from renovations that I wasn't sure would count, and the system sorted through everything and told me which ones would reduce my taxable amount. It also created a report I could give to my tax preparer that made filing way easier. Saved me a ton of stress trying to figure out if I was doing it right.

Just wanted to follow up! I tried taxr.ai after seeing the recommendation here, and it was actually super helpful for my situation. I was really confused about capital gains calculation, especially since I had done several improvements over the years. The tool let me upload all my renovation receipts and closing documents, and it sorted through which improvements counted toward my basis. It also determined that in my case, I DID need to make an estimated tax payment since my expected capital gains were substantial. The report it generated showed exactly how much my gain would be, factoring in the realtor commission and closing costs. Definitely saved me from making a mistake that could have resulted in underpayment penalties. Now I feel much more confident about the whole process!

If you're struggling to get answers from the IRS about capital gains questions, I highly recommend using Claimyr (https://claimyr.com). I had a complicated situation with calculating my basis after inheriting part of a property, and I spent WEEKS trying to get through to someone at the IRS who could help. After getting nowhere with the normal IRS line, I tried Claimyr and they got me connected to an IRS agent in about 20 minutes! You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The agent walked me through exactly how to report my capital gains and when payment was due. Turns out I had been calculating my basis incorrectly for years. The service basically holds your place in line with the IRS and calls you when an agent is available so you don't have to listen to hold music for hours.

Update: I owe everyone an apology, especially Profile 5. I was super skeptical about Claimyr but I was desperate to talk to someone at the IRS about my capital gains situation, so I tried it yesterday. I'm shocked to say it actually worked! I've been trying for weeks to get through about a mistake on my return related to a property sale. Claimyr had me connected to an IRS agent in about 35 minutes, which is LIGHT YEARS faster than my previous attempts (which all ended in "call back later" messages). The agent clarified that for my situation, I needed to file an amended return because I had calculated my capital gains incorrectly. She walked me through exactly what forms I needed and how to properly document some home improvements I had made that would increase my basis. So yeah... I was wrong, and I'm actually really grateful for the recommendation. Saved me a ton of stress and potentially an audit down the road.

One thing nobody mentioned yet is that if your capital gain is significant enough, you might need to make estimated tax payments. If you expect to owe more than $1,000 when you file your return, you could face underpayment penalties if you wait until tax time to pay it all. The safe harbor is generally to pay either 90% of your current year tax or 100% of your prior year tax (110% if your AGI was over $150,000). So even though capital gains are reported and paid with your annual return, you might need to send in estimated payments during the year to avoid penalties.

Has anyone used TurboTax for reporting home sales with capital gains? I'm planning to sell my house soon (also under 2 years) and wondering if I need to upgrade to their premium version or if the deluxe can handle this.