One of the first questions homeowners ask me when they start thinking about selling is:

“How much am I going to pay in capital gains taxes?”

It’s a particularly important question here on the Peninsula.

Many homeowners bought their homes 15, 20, or even 30 years ago, when prices looked very different from what they do today. That appreciation is a wonderful thing, but it can also mean a meaningful tax bill when it’s time to sell.

And that’s why I always tell sellers:

Don’t plan around what your home sells for. Plan around what you’ll actually keep.

I’m not a CPA, and this is not tax advice. But after helping Peninsula homeowners sell for nearly two decades, I believe this is a conversation worth having well before your home goes on the market.

First, Understand the Home-Sale Exclusion

If the home has been your primary residence, you may qualify to exclude up to:

• $250,000 of gain if you’re single

• $500,000 of gain if you’re married and filing jointly

Generally, you must have owned and lived in the property as your primary residence for at least two of the five years before the sale.

There are additional rules and exceptions, so your CPA should always confirm what applies to you.

In many parts of the country, that exclusion may cover most or all of a homeowner’s gain.

On the Peninsula, that isn’t always the case.

A Very Peninsula Example

Imagine a couple bought their Redwood City, San Carlos, or Belmont home 15 years ago for $800,000.

Today, that home might be worth $3.2 million.

At first glance, that looks like a $2.4 million gain.

But that doesn’t automatically mean $2.4 million is taxable.

Your actual calculation may take into account:

Sale price
Minus qualifying selling expenses
Minus your adjusted cost basis
Minus any available exclusion
Equals your potentially taxable gain

That adjusted cost basis is where homeowners are sometimes pleasantly surprised.

Your Remodels May Matter More Than You Think

Your basis generally starts with what you paid for the home, but qualifying improvements made over the years may increase it.

Depending on your circumstances, those could include things like:

• A major kitchen or bathroom remodel

• An addition

• A new roof

• HVAC replacement

• New windows

• Electrical or plumbing upgrades

• Significant landscaping improvements

Routine repairs and maintenance are generally treated differently.

So if you’ve owned your home for 20 years and remodeled the kitchen, replaced the roof, redid the landscaping, upgraded the electrical, and added a bathroom, this is not the time to say:

“I have no idea where those receipts are.”

Start looking now.

Invoices, contracts, permits, canceled checks, and other records may be helpful. Your CPA can tell you exactly what documentation is appropriate for your situation.

What Taxes Might You Face?

Depending on your circumstances, taxable gain from the sale of your home may be subject to:

• Federal long-term capital gains tax

• The 3.8% Net Investment Income Tax in certain situations

• California income tax

California generally taxes capital gains as ordinary income rather than offering a separate lower long-term capital gains rate.

Your total income in the year of the sale matters too.

A large bonus, stock-option exercise, business sale, or significant investment income can affect the overall tax picture.

Which brings us to something sellers don’t always think about.

The Timing of Your Sale Can Matter

Taxes should never be the only reason you decide when to sell.

The market matters. Your next move matters. Your home’s condition matters. Your family and financial plans matter.

But taxes should be part of the discussion.

If you’re already thinking about selling next year, that’s worth mentioning to your CPA now.

Sometimes the smartest decisions happen long before there’s a For Sale sign in the yard.

What If the Home Was Ever a Rental?

This is where things can get more complicated.

If the property was ever a rental, second home, business property, or was converted between rental and primary-residence use, additional tax rules may apply.

Depreciation recapture and other factors can change the calculation.

A 1031 exchange may also be an option for certain investment properties, although it generally doesn’t apply to the sale of a primary residence.

These are conversations to have before you sell, not after.

Marriage, Divorce, Inheritance, and the Death of a Spouse

Major life changes can also affect your tax situation and your cost basis.

If you’ve recently married, divorced, lost a spouse, or inherited an interest in a property, don’t assume the standard $250,000 or $500,000 exclusion tells the entire story.

A CPA, estate attorney, or tax attorney can help you understand what applies to your specific circumstances.

Before You Put Your Home on the Market

If your home has appreciated significantly, I recommend getting two sets of numbers.

From your CPA:

Ask about:

1. Your adjusted cost basis

2. Your available home-sale exclusion

3. Your estimated taxable gain

4. Potential federal and California taxes

5. Whether the timing of your sale matters

6. Any special circumstances involving rental use, inheritance, divorce, or the death of a spouse

From your real estate agent:

You should understand:

1. What your home could realistically sell for

2. What preparation will give you the best return

3. Your estimated selling expenses

4. Your likely net proceeds

5. How current Peninsula market conditions may affect your timing

When you have both sides of that equation, you can make a much more informed decision.

The Number I Want Sellers Focused On

A $3 million sale sounds exciting.

But you aren’t putting $3 million into your bank account.

There may be a mortgage payoff, preparation expenses, selling costs, and taxes.

That’s why I believe the most useful conversation isn’t simply:

“What can I sell my house for?”

It’s

“If I sell my house, what will I realistically walk away with?”

That is a much better number to build your next chapter around.

My role is to help you understand your home’s potential value, what it may take to prepare and position it properly, what the current Peninsula market looks like, and what your estimated selling costs may be.

Your tax professional handles the tax side.

And the earlier those conversations happen, the more options you usually have.

If you’re considering selling in Redwood City, San Carlos, Belmont, Menlo Park, San Mateo, Palo Alto, Los Altos, or one of the surrounding Peninsula communities, I’m always happy to start with a thoughtful, realistic valuation and help you understand what a potential sale could look like.

Kat Bedbury
The Bedbury Group
Golden Gate Sotheby’s International Realty
650-740-4494
Team@BedburyGroup.com
DRE #01817656

Your Dreams, Non-Negotiable®

About Kat Bedbury and The Bedbury Group

Kat Bedbury is a top-producing Peninsula Realtor® with Golden Gate Sotheby’s International Realty and co-founder of the Bedbury Group. She helps buyers and sellers throughout San Mateo and Santa Clara Counties navigate real estate with thoughtful strategy, local knowledge, and hands-on guidance from preparation through closing.

This article is provided for general informational purposes only. It is not tax, legal, accounting, or financial advice, and it does not guarantee any particular tax result. Tax laws and income thresholds can change. Every homeowner’s basis, income, deductions, ownership history, and filing situation are different. Please consult a qualified CPA or tax attorney before making decisions regarding the sale of your property.