Selling your house and moving to another state means running three tracks at once: the tax treatment of your sale profit, the mechanics of closing on one home while buying or renting in another, and the administrative work of becoming a legal resident somewhere new. Federal law lets most homeowners exclude up to $250,000 of gain from the sale of a principal residence, or $500,000 for married couples filing jointly, so long as ownership and use tests are met. Everything else — contingencies, closing costs, your driver’s license, part-year tax returns — flows from that starting point.
Capital Gains Tax on the Sale
Under Section 121 of the Internal Revenue Code, you can exclude gain from the sale of your principal residence if you owned and used the home as your primary residence for at least two of the five years before the sale date.1Office of the Law Revision Counsel. 26 USC 121 Exclusion of Gain From Sale of Principal Residence The two years do not need to be consecutive. They just need to total 24 months within the five-year window. You also cannot have claimed this exclusion on another home sale within the prior two years.
The maximum exclusion is $250,000 for single filers and $500,000 for married couples filing jointly.1Office of the Law Revision Counsel. 26 USC 121 Exclusion of Gain From Sale of Principal Residence To qualify for the full $500,000, at least one spouse must meet the ownership requirement and both spouses must meet the two-year use requirement. Any profit above the exclusion is taxed as a long-term capital gain at federal rates of 0%, 15%, or 20%, depending on your taxable income.2Internal Revenue Service. Topic No. 409, Capital Gains and Losses
Partial Exclusion for a Job Move
If you haven’t hit the two-year mark and you’re moving for work, you may still qualify for a partial exclusion. The IRS allows a prorated amount when the sale is primarily due to a change in workplace location, a health issue, or an unforeseeable event. For a work-related move, your new job generally needs to be at least 50 miles farther from the home than your previous workplace was.3Internal Revenue Service. Publication 523, Selling Your Home The partial exclusion is calculated by multiplying the full exclusion amount by the fraction of the two-year requirement you actually met. If you lived in the home for one year, you could exclude up to half the maximum.
When You Must Report the Sale
If your entire gain falls within the exclusion, you generally do not have to report the sale on your tax return. The exception is when you receive Form 1099-S from the closing agent; then you must report the sale even if there is no taxable gain.4Internal Revenue Service. Tax Considerations When Selling a Home Gain above the exclusion is always reported and taxed in the year of the sale.
Coordinating the Sale With Your Move
Selling one home and settling in another state rarely lines up on the calendar. Contingency clauses in your contracts are what keep you from carrying two mortgages or losing an earnest money deposit.
- A home sale contingency makes your purchase of the new home dependent on finding a buyer for your current one. If your existing home doesn’t sell within the agreed timeframe, the contract is voided and you get your earnest money back.
- A settlement contingency ensures the new purchase only goes through if funds from your old home actually reach you at closing. It protects your liquidity if the first sale falls apart at the last minute.
- A kick-out clause lets the seller of the property you want to buy keep marketing the home while your home sale contingency is pending. If a competing offer arrives, you typically have 48 to 72 hours to either remove your contingency or walk away.
These deadlines commonly run 30 to 60 days and are negotiable. A home sale contingency does make your offer less competitive in a hot market, which is why some buyers sell first, arrange bridge financing, or plan a short rental in between.
If your old home closes before your new place is ready, a post-settlement occupancy agreement (sometimes called a rent-back) lets you stay in the property for a set period after title transfers to the new owner. It usually specifies a daily rental rate, a security deposit, and a firm move-out date, and it requires the buyer’s agreement.
What the Sale Actually Costs You
Closing costs come out of your proceeds, so estimate them before you commit to a purchase in the new state. Typical seller expenses include:
- Real estate commissions, still the largest single cost. Following industry changes that took effect in 2024, buyer and seller agent commissions are negotiated separately rather than bundled together. What you owe your listing agent depends on your agreement with them.
- Transfer taxes, charged in roughly three-quarters of states when real property changes hands. Rates run from a small flat fee to several percent of the sale price, and some localities add their own tax on top. A handful of states charge nothing.
- Title insurance. In many markets the seller pays for an owner’s policy that protects the buyer against defects like unpaid liens, ownership disputes, forged documents, or clerical errors in public records. The premium is a one-time charge based on the sale price.
- Recording and escrow fees for filing the new deed and handling the closing itself.
- Prorated property taxes, HOA dues, and similar recurring charges through the closing date.
Attorney fees vary with the complexity of the sale and whether your state requires an attorney at closing. Ask your listing agent or settlement company for a preliminary net sheet so you know what actually lands in your account.
Closing From Out of State
If you’ve already relocated, you may not need to fly back. Most states now authorize remote online notarization, which lets you sign closing documents over a live video connection with a commissioned notary. A remotely notarized document is generally recognized across state lines as long as the notarization complied with the laws of the state where the notary is commissioned. Confirm with the county recorder’s office that they accept electronically notarized deeds for recording. When funds arrive, verify wire instructions by phone directly with your title company; wire fraud targeting real estate closings is common.
Disclosures You Owe the Buyer
Nearly every state requires sellers to complete a property disclosure form covering structural issues, past repairs, the age of major systems, water intrusion history, and insurance claims. The specific form varies by state. Failing to disclose a known defect can lead to lawsuits or the unwinding of the sale.
If your home was built before 1978, federal law adds a lead-based paint disclosure on top of any state form. Under 42 U.S.C. § 4852d, you must disclose any known lead-based paint or lead-based paint hazards, provide the buyer with an EPA-approved lead hazard information pamphlet, and give the buyer a 10-day window to conduct a lead inspection before they are obligated under the contract.5Office of the Law Revision Counsel. 42 U.S. Code 4852d – Disclosure of Information Concerning Lead Upon Transfer of Residential Property A signed Lead Warning Statement must be part of the purchase contract. You and the buyer can agree to a shorter or longer inspection period, but you cannot waive the disclosure requirements. Depending on the property’s location, additional flood zone, wildfire, or earthquake disclosures may also apply.
Hiring an Interstate Moving Company
Any company that transports household goods across state lines is regulated by the Federal Motor Carrier Safety Administration. Interstate movers must carry a USDOT number and be registered with FMCSA.6FMCSA. Do I Need a USDOT Number? You can verify a mover’s registration and complaint history on the FMCSA website. Before the move, a legitimate mover must provide a written estimate, a copy of the “Your Rights and Responsibilities When You Move” booklet, and information about their dispute resolution program.7FMCSA. Your Rights and Responsibilities When You Move
Federal law requires interstate movers to offer two levels of liability coverage. Full Value Protection makes the mover responsible for the replacement value of any lost or damaged items and is the default. Items worth more than $100 per pound, like jewelry or fine art, may be excluded unless you list them specifically on the shipping documents. Released Value costs nothing but caps the mover’s liability at 60 cents per pound per item; a 50-pound television damaged in transit would be covered at $30 regardless of its actual value.8FMCSA. Liability and Protection Your shipment travels under Full Value Protection automatically unless you sign a written statement choosing Released Value.
On moving day, the driver prepares an inventory noting existing damage. Both of you sign each page. Keep your copy with the bill of lading, which is the contract between you and the mover.
Becoming a Resident of Your New State
Once you’ve moved, several steps establish that your new state is your legal home. They aren’t optional.
- Driver’s license. Most states require new residents to surrender the old license and apply for a new one within 30 to 90 days of establishing residency. Deadlines vary, so check with your new state’s motor vehicle agency soon after arriving.
- Vehicle registration. Many states require you to register your car and obtain new plates within a similar window. Some tie this deadline to the license deadline, others set a separate one.
- Voter registration. Update your registration through the new state’s election office or the national voter registration portal.
- IRS address change. File Form 8822 so refund checks and audit notices reach you.9Internal Revenue Service. About Form 8822, Change of Address
- Mail forwarding through USPS to catch anything sent to the old address during the transition.
Update your address with banks, insurance companies, and any professional licensing boards as well. If you have a will, trust, or power of attorney, review those documents with an attorney in your new state; estate planning laws differ, and a document drafted in one state may not work as intended in another.
Updating Your Health Insurance
Moving to a new state is a qualifying life event that opens a special enrollment period, even outside the normal open enrollment window.
If you have coverage through the ACA marketplace, moving to a new ZIP code or county qualifies you to enroll in a new plan. You must have had qualifying health coverage for at least one day during the 60 days before your move to be eligible.10HealthCare.gov. Getting Health Coverage Outside Open Enrollment Moving solely for medical treatment or for a vacation does not qualify.
If you’re on a Medicare Advantage plan or a Part D prescription drug plan, moving out of the plan’s service area triggers a separate special enrollment period. You have two full months after the move to switch plans, or three months if you notify your current plan before you move.11Medicare.gov. Special Enrollment Periods You can also switch back to Original Medicare during this window.
Employer coverage doesn’t always require a change, but if the network doesn’t cover providers near your new address, ask HR about switching to a plan that does.
Filing State Income Taxes the Year You Move
In the year you change states, you’ll usually owe income taxes to both the old state and the new one. Most states with an income tax require a part-year resident return covering the portion of the year you lived there. Income earned while you were a resident of the old state is generally taxed by that state, and income earned after the move is taxed by the new state.
To prevent the same income from being taxed twice, most states offer a credit for taxes paid to another state on the same income. Check both states’ part-year resident return instructions to see how the credit is applied. Some states have you claim it on the old state’s return; others put it on the new state’s return.
Watch for physical presence rules. Some states use a threshold, commonly 183 days, to determine tax residency. If you keep a home in the old state or spend significant time there after your move, the old state could continue to treat you as a resident and tax your full-year income. A clean break, meaning selling the home, updating your license, and registering to vote in the new state, strengthens your position that residency shifted on the date you moved. If either your old or new state has no income tax, the part-year return only needs to be filed with the state that does.