Capital gains tax
You’ve likely heard the term “capital gains tax,” but what is it?
When you sell a “capital asset,” which is something you own, such as a piece of real estate, that is not used for a business, any profits that the sale yields are considered capital gains. Capital assets most commonly include things like your home or vehicle, but they can also include stocks, bonds, or art.
A capital gains tax is a tax levied on any capital gains earned during a tax year. For example, if you purchased your Utah home for $535,000 and sold it a few years later for $635,000, you have earned a capital gain of $100,000, which would be taxed.
Capital gains tax rates differ by state. Some states, like Florida, don’t even have a capital gains tax. Utah charges a flat rate for its capital gain tax of 4.5%.
Capital gains are also classified as “short-term” or “long-term” at the Federal level.
- Capital gains are considered short-term when an asset is sold within a year of its purchase. Those gains are lumped into your regular income and taxed according to your tax bracket.
- Capital gains are considered long-term when earned from the sale of an asset after at least a full year of ownership. Those gains are taxed at a variable rate for a home sale, depending on your income. The table below will illustrate:
Federal 2026 capital gains tax brackets
The table below shows the long-term capital gains rates for tax year 2026. The federal income tax has seven tax rates in 2026: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
| Tax Rate | Single Filers | Married Filing Jointly | Head of Household |
| 10% | $0 to $12,400 | $0 to $24,800 | $0 to $17,700 |
| 12% | $12,401 to $50,400 | $24,801 to $100,800 | $17,701 to $67,450 |
| 22% | $50,401 to $105,700 | $100,801 to $211,400 | $67,451 to $105,700 |
| 24% | $105,701 to $201,775 | $211,401 to $403,550 | $105,701 to $201,775 |
| 32% | $201,776 to $256,225 | $403,551 to $512,450 | $201,776 to $256,200 |
| 35% | $256,226 to $640,600 | $512,451 to $768,700 | $256,201 to $640,600 |
| 37% | $640,601 or more | $768,701 or more | $640,601 or more |
It’s also possible to exclude your capital gains at the Federal level, assuming you qualify.
The maximum amount of capital gain that can be excluded is $250,000 for single filers and $500,000 for a married couple filing jointly.
According to the IRS Publication 523, you must meet these criteria:
- The home being sold is your primary residence.
- You’ve owned the home for at least two years in the five-year period before selling it.
- You’ve lived in the home for at least two years within the five-year period before selling it. The years you’ve lived in it don’t need to be consecutive. Certain exceptions to this rule are made for those who are disabled or those in the military, Foreign Service, intelligence community, or Peace Corps.
- You didn’t acquire the home through a like-kind exchange (also known as a section 1031 exchange) within the past five years. This is basically when you swap one investment property for another.
- You haven’t claimed the exclusion on another home in the past two years.
- You aren’t subject to expatriate tax (a government fee paid by those who renounce their citizenship or take up residency in another country).
You may still qualify for a partial exclusion even if you don’t fit any of the above criteria.
Circumstances such as a change in workplace location, a problem with your health, or having to sell the property of a parent who passed away, among others, can qualify you. For more, please refer to IRS Publication 523.
How to report your Utah capital gains taxes
Utah transfer taxes
The government charges a tax on this transaction whenever you sell your home and transfer the legal ownership to the buyer. This is known as a transfer tax, also sometimes called a Documentary Stamp Tax or recordation tax, depending on the state.
The Federal Trade Commission describes transfer taxes as fees that state or local governments impose when the title to a property transfers from one owner to another.
The amount owed in transfer taxes when selling your home will vary, as different states, counties, and cities have their own guidelines. Similar to other forms of taxation, these taxes are a way for the government to generate revenue and are an important part of determining your overall profit when selling your home.
Who pays the transfer tax will also depend on the state. Sometimes it’s the buyer, sometimes it’s the seller. Utah, unlike most states, does not charge a transfer tax. However, Utah sellers are still responsible for other closing costs.
Property taxes owed
Property tax is a charge levied on real estate based on its assessed value, usually yearly. Like most tax-related charges, property taxes fluctuate depending on the state.
According to the Tax Foundation, Utah’s effective property tax rate on owner-occupied housing value is typically 0.48%.
Utah state taxes are paid every calendar year.
Your taxes are prorated to the day of sale when you sell your home, meaning you’ll only pay taxes for the days of the fiscal year that you owned your home.
The Utah State Tax Commission can provide more information about taxes specific to your city or town.
