By Mark Hewitt · Hewitt Group at Real Broker, LLC
North Richland Hills sellers approaching a home sale in 2026 need the same thorough understanding of federal capital gains tax that every Texas seller deserves — a complete, standalone analysis that covers every relevant provision of the tax code as it applies to their specific situation. The dual school district geography that makes NRH unique within the Tarrant County residential market does not affect the federal capital gains rules — the IRS applies the same framework to every American homeowner regardless of whether their home is assigned to Birdville ISD or Keller ISD. But the Keller ISD premium that drives above-average appreciation in the 76182 corridor, combined with the long ownership periods of some NRH residents, does create capital gains planning considerations for a specific segment of the NRH seller population that the Hewitt Group addresses at every initial seller consultation.
Mark Hewitt and the Hewitt Group at Real Broker, LLC serve sellers throughout NRH's 76180, 76182, and 76137 zip codes and provide capital gains guidance calibrated to the specific circumstances of each seller rather than a one-size-fits-all overview that may miss the details that matter most for an individual transaction.
Why Texas Sellers Still Face Federal Capital Gains Tax
Texas has no state income tax, which means Texas home sellers owe no state-level capital gains tax on the sale of their properties — a genuine financial advantage that is particularly meaningful for sellers in high-appreciation markets. However, the federal capital gains tax applies to all Americans regardless of state of residence, and it is the only capital gains exposure that NRH sellers need to plan around.
The absence of state income tax in Texas means that NRH sellers retain more of their gross proceeds than comparable sellers in states like California (where state capital gains rates reach 13.3%), New York (where state rates reach 10.9% plus potential city income tax), or Illinois (where the flat 4.95% state income tax applies to capital gains). This Texas advantage is particularly significant for NRH sellers with large gains above the federal exclusion threshold — but it does not eliminate the federal obligation, which is the planning focus of this guide.
How the Capital Gain Is Calculated for NRH Sellers
The capital gain from an NRH home sale equals the net sale proceeds minus the adjusted cost basis. The adjusted cost basis is the original purchase price plus the cost of capital improvements made during the ownership period. Net sale proceeds are the gross sale price minus the direct costs of sale — primarily the real estate commission and the seller's title insurance obligation under Texas custom.
For an NRH seller in the 76182 Keller ISD corridor who purchased their home for $225,000 in 2009, invested $55,000 in capital improvements over fifteen years, and is selling today for $420,000, the calculation is as follows. The adjusted basis is $280,000 ($225,000 plus $55,000 in improvements). Net sale proceeds after a 5.5% commission on a $420,000 sale equal approximately $396,900. The capital gain is approximately $116,900 ($396,900 minus $280,000). This $116,900 gain is then evaluated against the primary residence exclusion to determine the federal tax liability.
Capital improvements that NRH sellers should compile and document include kitchen renovations, bathroom renovations, HVAC system replacements, roof replacements, additions of square footage, pool installations, outdoor living structure additions, window replacements, flooring replacements, and electrical or plumbing system upgrades. Routine maintenance does not increase the basis — only improvements that materially add to the property's value or extend its useful life qualify as capital improvements under the IRS rules.
The Primary Residence Exclusion for NRH Sellers
The Section 121 primary residence exclusion allows qualifying NRH homeowners to exclude up to $250,000 of capital gain from federal income tax if filing as single, or up to $500,000 if married filing jointly. For the vast majority of NRH owner-occupant sellers at current market prices across all three zip codes, this exclusion eliminates the federal capital gains liability entirely.
In the example above — the 76182 Keller ISD seller with a $116,900 capital gain — the single-filer exclusion of $250,000 eliminates the entire gain from federal taxation. A married couple in the same situation has even more comfortable protection under the $500,000 married exclusion. Zero capital gains tax is owed in either scenario, and the pre-sale capital gains analysis is a confirmation exercise rather than a planning challenge.
The same arithmetic applies across NRH's price spectrum. Sellers in the more accessible 76180 Birdville ISD corridor — where purchase prices in the 2010s ran $180,000 to $220,000 and current values are in the $320,000 to $370,000 range — have accumulated gains of $100,000 to $190,000 that fall well within both exclusion thresholds. Sellers in the premium 76182 Keller ISD corridor — where purchase prices in the 2010s ran $220,000 to $280,000 and current values are in the $380,000 to $460,000 range — have accumulated gains of $160,000 to $240,000 that similarly fall within the exclusion for most sellers, particularly after improvement documentation is applied.
The Keller ISD Premium and Capital Gains: The Above-Average Appreciation Scenario
The Keller ISD school district premium in NRH's 76182 zip code has driven above-average appreciation for Keller ISD-assigned properties over the past decade — and for long-term single-filer owners in this corridor whose original purchase prices were relatively modest, this above-average appreciation creates gains that approach or in some cases exceed the single-filer exclusion threshold more readily than in the Birdville ISD corridor.
Consider a single NRH homeowner who purchased a Keller ISD-assigned home in 76182 for $195,000 in 2007 and is selling today for $435,000. The gross gain is $240,000 — within the $250,000 single-filer exclusion by $10,000 before improvement credits. With even minimal documented improvements from seventeen years of ownership, the adjusted gain falls comfortably below the exclusion threshold. Zero capital gains tax is owed.
But consider a single NRH homeowner who purchased in 76182 for $165,000 in 2003 and is selling today for $440,000. The gross gain is $275,000 — $25,000 above the single-filer exclusion before improvement credits. This seller needs documentation of at least $25,000 in capital improvements to bring the adjusted gain within the exclusion — an amount that is easily achievable with even minimal improvement history over twenty-plus years of ownership, but that must be documented with records rather than simply asserted. Without adequate improvement documentation, this seller faces a $25,000 excess gain subject to long-term capital gains tax at 15% to 20% — a $3,750 to $5,000 federal tax obligation that proper pre-sale documentation could eliminate entirely.
This is exactly the scenario that makes the capital improvement documentation exercise so important for long-term NRH sellers in the Keller ISD corridor — a relatively small amount of documentation can make the difference between owing a meaningful tax and owing nothing.
The Ownership and Use Requirements for NRH Sellers
Both the ownership test and the use test must be independently satisfied for the full exclusion to apply — the seller must have owned the home for at least two years AND used it as their primary residence for at least two years within the five-year lookback period preceding the sale date. For the vast majority of NRH sellers who have lived in their homes continuously for multiple years, satisfying both tests is straightforward. The scenarios where these tests become relevant planning considerations are those involving recent purchases, period of non-use as a primary residence, or sales within two years of purchase.
The partial exclusion for employment change, health hardship, or unforeseen circumstances applies to NRH sellers whose sale before the two-year mark is driven by a qualifying hardship — exactly as it applies in every other Texas market. NRH sellers who received a job transfer, a military reassignment, or another qualifying life change that requires a sale before two years should specifically discuss the partial exclusion with their tax professional rather than assuming the full exclusion is unavailable and delaying a necessary sale.
Long-Term NRH Homeowners: The 1990s and Early 2000s Purchase Scenarios
NRH contains a meaningful population of homeowners who purchased their properties in the 1990s or early 2000s at prices that are a fraction of today's values — and for single-filer owners in this group, the accumulated appreciation may meaningfully exceed the $250,000 exclusion threshold even after improvement documentation is applied. A single NRH homeowner who purchased in 76180 for $115,000 in 1996 and is selling today for $355,000 has a gross gain of $240,000 — within the $250,000 exclusion by $10,000 before improvements. With documented improvements from nearly thirty years of ownership, the adjusted gain falls further below the exclusion.
A single NRH homeowner who purchased for $95,000 in 1993 and is selling today for $360,000 has a gross gain of $265,000 — $15,000 above the single-filer exclusion before improvements. This scenario is common enough among long-term NRH single homeowners that the Hewitt Group specifically prompts the capital improvement documentation exercise for every seller who purchased before 2000 in any NRH zip code.
For married couples in these long-ownership scenarios, the $500,000 exclusion is more than adequate to absorb the accumulated appreciation across virtually all realistic NRH price scenarios — producing zero capital gains tax for the vast majority of long-term NRH married homeowners regardless of the appreciation accumulated.
NRH Investment Properties: Depreciation Recapture and Capital Gains
North Richland Hills has a meaningful investment property ownership community — particularly in the 76180 zip code where the lower price points of Birdville ISD-assigned properties have historically supported rental acquisition by individual investors. NRH investment property sellers face the same depreciation recapture and capital gains framework that applies across Texas — with no state-level tax on the gain but with federal capital gains tax on the appreciation and a flat 25% depreciation recapture tax on the accumulated depreciation.
An NRH investor who purchased a 76180 rental property for $175,000 in 2014 and is selling today for $310,000 has a gross appreciation gain of $135,000. But the adjusted basis has been reduced by accumulated depreciation — at $6,364 per year for ten years, the accumulated depreciation is $63,636, reducing the adjusted basis from $175,000 to $111,364 and increasing the total taxable gain to $198,636. Of this gain, $63,636 is subject to 25% depreciation recapture tax ($15,909) and the remaining $135,000 appreciation gain is subject to long-term capital gains tax at 15% to 20% ($20,250 to $27,000). Total federal tax exposure: approximately $36,159 to $42,909 before the net investment income tax — a significant cost that makes the 1031 exchange option worth evaluating for any NRH investor who plans to reinvest in replacement real estate.
The 1031 Exchange for NRH Investment Property Sellers
The 1031 like-kind exchange allows NRH investment property sellers to defer all capital gains and depreciation recapture taxes by reinvesting the sale proceeds into qualifying replacement property within the 45-day identification and 180-day completion windows. For an NRH investor with $40,000 in combined tax liability, the 1031 exchange allows this $40,000 to remain working in replacement real estate rather than paid to the IRS — a compounding advantage that grows with each subsequent exchange.
NRH investment property sellers who are considering a 1031 exchange should begin the planning conversation at least 60 to 90 days before the anticipated listing date — identifying likely replacement properties, selecting a qualified intermediary who will hold the exchange proceeds, and coordinating the sale and replacement purchase timelines to meet the 45-day and 180-day deadlines. The Hewitt Group's investment property seller services include qualified intermediary referrals and the coordination support that makes 1031 exchange execution as smooth as possible.
The School District Variable and Post-Sale Tax Considerations
One NRH-specific post-sale consideration worth mentioning is the property tax homestead exemption adjustment that the buyer will experience after purchasing a Keller ISD or Birdville ISD-assigned NRH home. The seller's existing homestead exemption — which may have capped appreciation at 10% annually for many years — does not transfer to the new buyer, who will be assessed at full market value in their first ownership year. This reset sometimes produces a first-year tax bill for the buyer that is significantly higher than the seller's most recent bill — and while this is a buyer concern rather than a seller capital gains issue, it occasionally affects offer negotiations when buyers discover the projected tax increase during their due diligence.
Mark Hewitt and the Hewitt Group at Real Broker, LLC provide every NRH seller with a capital gains assessment at the initial consultation — covering the ownership and use verification, the gain calculation with improvement documentation guidance, and the professional referrals for sellers whose situations warrant specialized tax advice. Contact us today for your NRH seller consultation.
