What taxes do you owe after selling your Midwood home?
After you Sell Home in Midwood, your potential taxes usually include federal capital gains tax (with big exclusions for a primary residence), possible Net Investment Income Tax (NIIT), plus New York State and New York City income taxes on any taxable gain. Your exact bill depends on how long you lived in the home, your profit after allowable adjustments, and your overall income. Always confirm specifics with a licensed CPA or tax attorney.
Quick Answer:
If the Midwood property was your primary residence for 2 of the last 5 years, you may exclude up to $250,000 of gain if single or $500,000 if married filing jointly. You’ll only owe taxes on gain above that exclusion (and only after subtracting selling costs and qualified improvement expenses). Investment or second homes don’t get the home-sale exclusion; they may also trigger depreciation recapture and are candidates for a 1031 exchange (if you reinvest correctly and the property qualifies).
For a precise estimate, ask Dalia Samouha at Ideal Properties Realty for a seller net sheet and then review it with your CPA.
What “Gain” Actually Means (and Why Your Taxable Amount May Be Lower Than You Think)
Your capital gain isn’t simply “sale price minus what I paid.” The IRS looks at your adjusted basis and allowable selling costs:
Adjusted Basis = Original Purchase Price
Capital Improvements (new roof, kitchen remodel, HVAC; not routine maintenance)
Buying Costs that were capitalized
– Any casualty loss or depreciation (if the home was ever rented)
Net Proceeds = Contract Sale Price
– Real estate commission
– Transfer taxes (NYS + NYC, typically seller-paid)
– Legal fees and other allowable selling costs
– Recording/discharge fees, etc.
Capital Gain = Net Proceeds – Adjusted Basis
Many Midwood sellers trim tens of thousands off their taxable gain simply by documenting capital improvements and closing costs.
The Primary Residence Exclusion (The Big Tax Saver)
If this Midwood property is your primary residence, you may be able to exclude a large portion of your gain:
$250,000 exclusion if single
$500,000 exclusion if married filing jointly
You generally must:
Own the home 2+ years out of the last 5 years, and
Live in it as your primary residence for 2+ years in that same 5-year window.
You can typically use the exclusion once every two years. If you don’t fully meet the tests, there are limited partial exclusions for certain unforeseen circumstances (job change, health reasons, etc.). A CPA can help determine eligibility.
Example: A Midwood Primary-Residence Sale
2014 purchase price: $700,000
Improvements (roof + bath + HVAC): $60,000
Adjusted basis: $760,000
2025 contract price: $1,250,000
Selling costs (commission, NYS/NYC transfer taxes, attorney, etc.): $75,000
Net proceeds: $1,250,000 – $75,000 = $1,175,000
Capital gain before exclusion: $1,175,000 – $760,000 = $415,000
If married filing jointly and you meet the 2-of-5 rule, the $500,000 exclusion would wipe out the $415,000 gain → $0 federal capital gains tax (but talk to your CPA about state/city returns and NIIT thresholds).
New York State and NYC Income Taxes on the Sale
If any of your gain remains taxable after the federal exclusion, New York State and New York City (if you’re a city resident) generally tax that income as well. Rates vary by income bracket. Planning tip: if your income will spike in the sale year, ask your CPA about estimated taxes so you’re not penalized next April.
Important distinction: Transfer taxes (NYS + NYC) are typically paid at closing by the seller; they reduce your net proceeds but they’re not income taxes you pay “after” the sale. The income taxes (federal/state/city) are what you might owe the following tax season on any taxable gain.
The 3.8% Net Investment Income Tax (NIIT)
High-income sellers may also face the NIIT (3.8%) on net investment income, which can include the portion of home-sale gain not excluded by the primary residence rule. Whether NIIT applies depends on your modified adjusted gross income. Your CPA will calculate this for you.
If the Property Was a Rental, Second Home, or Mixed Use
Primary-residence benefits don’t apply to:
Second homes/vacation homes
Investment/rental properties (unless you lived there long enough to meet the primary-residence tests)
Mixed-use scenarios (e.g., owner upstairs, rental downstairs), which require allocation of basis and gain
Depreciation Recapture (Rental or Former Rental)
If you ever rented the property and claimed depreciation, that portion is generally recaptured and taxed (often up to 25% at the federal level). This can apply even if you qualify for the home-sale exclusion on the primary-residence portion.
1031 Exchange (Investment Property Only)
If you’re selling a pure investment property and reinvesting in another investment property, a properly executed 1031 exchange can defer capital gains and depreciation recapture. Strict timelines (45/180 days) and qualified intermediaries are required. Speak to a 1031 specialist before you close.
Special Cases Midwood Sellers Ask About
1) Co-op & Condo “Flip Taxes” and Building Fees
These are generally seller costs at closing and reduce your net proceeds (helping lower your gain). Confirm with your accountant and keep all statements.
2) Inherited Property
Heirs usually receive a step-up in basis to the property’s fair market value at the decedent’s date of death. If you sell close to that stepped-up value, taxable gain may be minimal. Probate/title steps still matter—work with your estate attorney early.
3) Divorce, Health, Job Relocation
You may be eligible for a partial exclusion if you don’t fully meet the 2-of-5 tests but had a qualified reason to sell. Your CPA can apply the formula.
4) Live-In Renovation & Short Ownership
If you owned/lived in the home less than 2 years, you generally don’t qualify for the full exclusion. You’ll likely owe tax on all the gain (after basis/selling-cost adjustments), unless a partial exclusion applies.
Documents to Keep (So Your CPA Can Cut Your Tax Bill)
Closing disclosures (purchase and sale)
Commission agreement and final agent invoices
NYS/NYC transfer tax receipts
Attorney invoices and recording/discharge fees
Receipts for capital improvements (materials, contractors, permits)
Any depreciation schedules (if the home was ever rented)
Form 1099-S (you’ll likely receive this after closing)
Pro tip from Dalia Samouha: ask your agent for a seller net sheet before you list, then review it with your CPA to plan for estimated taxes and cash on hand.
Common Mistakes That Cost Midwood Sellers Money
Not tracking improvements → smaller basis → bigger taxable gain
Confusing repairs with capital improvements (only improvements increase basis)
Missing mixed-use allocations (e.g., accessory rental units)
Forgetting depreciation recapture after short-term rentals
Waiting until April to learn if estimated tax payments were needed
The Role of Your Real Estate Agent (and Why Local Matters)
A seasoned Midwood agent like Dalia Samouha (Ideal Properties Realty) can’t give tax advice, but she can maximize your net and reduce headaches by helping you:
Price for demand and reduce time on market
Document legitimate selling costs (so your CPA can reduce taxable gain)
Coordinate with attorneys and title early (clear liens, confirm payoffs)
Connect you with vetted CPAs and 1031 intermediaries (if applicable)
Plan Ahead: A Simple Checklist
Ask Dalia for a seller net sheet with conservative assumptions.
Gather receipts for capital improvements; separate from routine repairs.
Confirm your residency timeline (2 of last 5 years).
If you rented the home, pull depreciation schedules.
Consult a CPA/EA about federal, NYS, NYC, and NIIT exposure.
If it’s an investment property, discuss a 1031 exchange before you list.
After closing, watch for Form 1099-S and plan estimated taxes if needed.
Compliance, Ethics & Professional Guidance
We adhere to the Fair Housing Act, RESPA, the NAR Code of Ethics, and New York State advertising policies. This article is general information, not tax, legal, accounting, or financial advice. Please consult licensed professionals for guidance tailored to your situation.
Ready to Run Your Numbers?
If you’re considering selling your Midwood home, get a no-pressure pricing consult and personalized net sheet from Dalia Samouha at Ideal Properties Realty. We’ll help you estimate proceeds, organize documents for your CPA, and plan the smoothest path to closing.
