If you don’t quite check all of these boxes, you may still qualify for a partial exclusion of gain. This can happen if the main reason for your home sale is a change in workplace location, a health issue, or an unforeseeable event. For details on such circumstances, please refer to IRS Publication 523.
How to report your California capital gains taxes
For your federal return, report your capital gains and losses by using U.S. Individual Income Tax Return (IRS Form 1040) and Capital Gains and Losses, Schedule D (IRS Form 1040).
For your California capital gains, file California Capital Gain or Loss Schedule D (540).
California transfer taxes
A transfer tax is a transaction fee tacked onto the sale of any land or real property.
California’s documentary transfer tax varies depending on the location within the state.
The law permits general law counties and cities to charge 55 cents per $500 of property value or the amount paid ($1.10 per $1,000).
This amount can only be increased by charter counties or cities — those that have adopted a charter and therefore have supreme authority over municipal affairs. Of California’s 482 cities, 121 have charters.
Here are some examples of what the documentary transfer tax looks like in a few of California’s largest cities:
*The transfer tax rate in some cities is tiered so that the greater the purchase price or market value, the greater the tax.
When transferring a home in California, the seller usually pays the tax, but this can be a point of negotiation during the transaction. If left unpaid by the time the sale goes through escrow, then the payment responsibility automatically falls on the buyer.
Property taxes owed
Annual property taxes in California have two payment stubs. They can be paid simultaneously or in two installments.
The first installment is due Nov. 1 and becomes delinquent Dec. 10. The second installment is due on Feb. 1 and becomes delinquent April 10.
Once a home is sold, the seller is no longer responsible for its property taxes.
For example, if the fictional Jim and Susie pay the first installment in November and then sell their Sacramento home in December, it is now up to the buyers to cover the second installment due in the spring.
Aird says he experienced a scenario like this firsthand as the buyer of a California home in 2021.
“Part of the closing cost was paying into an escrow for that next property tax payment that was due in a few months,” Aird says. “It was our responsibility as the buyer.”
