Selling homestead property in Texas comes with rules a standard home sale doesn’t have: both spouses must sign the deed even if only one owns the home, you owe the buyer a written disclosure before the contract binds, and the cash you walk away with is protected from most creditors for six months after closing. Handle those three things correctly and the rest of the transaction looks like any other Texas closing.
Both Spouses Have to Sign
The Texas Constitution says no owner may sell or abandon a homestead without the consent of each owner and each owner’s spouse.1Justia Law. Texas Constitution Article 16 Section 50 – Homestead; Protection From Forced Sale; Mortgages, Trust Deeds, and Liens The Family Code backs that up by requiring joinder of both spouses for any sale, conveyance, or encumbrance of the homestead, whether the property is separate or community.2State of Texas. Texas Family Code 5.001 – Sale, Conveyance, or Encumbrance of Homestead
This trips up sellers who owned the home before marriage. Doesn’t matter. Once the property became the couple’s homestead, both signatures are required at closing. The non-owning spouse usually signs to document consent, but that signature is not optional. A deed missing it can be challenged and set aside later, the sort of problem that surfaces when a future buyer tries to refinance or resell.
The Seller’s Disclosure Notice
Before your purchase contract takes effect, Texas requires you to give the buyer a written disclosure notice on a one-unit residential sale.3State of Texas. Texas Property Code 5.008 – Sellers Disclosure Notice The form runs through the condition of the roof, foundation, plumbing, electrical, and appliances, and asks about specific hazards: prior flooding, termite damage, lead-based paint, asbestos, and past use of the property for illegal drug manufacturing.
You answer based on what you actually know. If you don’t know, you mark it “unknown” and you’ve met the requirement for that item. The real danger is skipping the notice altogether. A buyer who signs a contract without receiving the disclosure can cancel the deal for any reason within seven days of finally getting it. That seven-day window has killed closings where sellers assumed the paperwork was a formality.
Your Sale Proceeds Are Protected for Six Months
Under the Texas Property Code, proceeds from a homestead sale are shielded from creditors’ claims for six months after closing.4State of Texas. Texas Property Code 41.001 – Interests in Land Exempt From Seizure Reinvest that money in a new Texas homestead within the six months and the protection carries over to the new property. Miss the window and the shield drops away, exposing whatever remains of those funds to general unsecured creditors.
Two practical points make the difference between keeping the protection and losing it. First, keep the sale proceeds in a separate account. Once you mix homestead money with other funds in a general checking account, proving which dollars came from the sale becomes difficult, and a creditor’s attorney will exploit that. Second, the shield covers general unsecured creditors, not everything. Property taxes, purchase-money liens, and properly documented construction or improvement loans can still attach to the property itself.4State of Texas. Texas Property Code 41.001 – Interests in Land Exempt From Seizure
Federal Tax Liens
A federal tax lien has to be dealt with before you can transfer clear title. The IRS is normally paid out of your closing proceeds, and Texas homestead protection does not override a properly recorded federal tax lien; the Property Code specifically lists it as an allowable encumbrance on homestead property.4State of Texas. Texas Property Code 41.001 – Interests in Land Exempt From Seizure
If the home is selling for less than the total lien, you can ask the IRS to discharge the lien from the property so the sale can close. That takes Form 14135, filed with the sales contract, a professional appraisal, a title report, and a proposed closing statement.5Internal Revenue Service. What if There Is a Federal Tax Lien on My Home? A discharge lifts the lien from that specific property so title can pass; it does not erase the underlying tax debt. Incomplete applications get denied often, so start well before your target closing date.
Federal Tax on the Profit
Texas has no state capital gains tax. A 2025 constitutional amendment prohibits the legislature from ever imposing one. Your only tax concern on the gain is federal.
A single filer can exclude up to $250,000 of profit from the sale of a primary residence, and a married couple filing jointly can exclude up to $500,000.6Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence For the full joint exclusion, at least one spouse must meet the ownership test and both spouses must meet the use test.
The tests: owned the home for at least two of the five years before the sale, and lived in it as your primary residence for at least two of those five years. The residence period doesn’t have to be consecutive. The IRS counts total days, so any combination adding up to 730 days inside the five-year window qualifies.7Internal Revenue Service. Publication 523 – Selling Your Home Any gain above the exclusion is taxable as a capital gain on your federal return. Property taxes are prorated at closing: you cover the portion of the year you owned the home, and the buyer picks up the rest.
FIRPTA if You’re a Foreign Seller
If you’re a foreign person selling Texas real estate, federal law requires the buyer to withhold 15% of the gross sale price and send it to the IRS.8Office of the Law Revision Counsel. 26 USC 1445 – Withholding of Tax on Dispositions of United States Real Property Interests This isn’t a separate tax; it’s an advance payment toward whatever federal income tax you owe on the sale. But 15% of the gross price, not the profit, can take a big bite out of closing proceeds.
Two exceptions reduce or eliminate the withholding:
- No withholding when the price is at or below $300,000 and the buyer is an individual acquiring the home as a personal residence.9Internal Revenue Service. Exceptions From FIRPTA Withholding
- Withholding drops to 10% when the price is between $300,001 and $1,000,000 and the buyer is acquiring the home as a residence.8Office of the Law Revision Counsel. 26 USC 1445 – Withholding of Tax on Dispositions of United States Real Property Interests
For the $300,000 exemption, the buyer must plan to live in the home at least 50% of the days it’s occupied during each of the first two years after purchase.9Internal Revenue Service. Exceptions From FIRPTA Withholding Vacant days don’t count. The exemption only applies when the buyer is an individual, not a corporation or trust.
Don’t Accidentally Abandon the Homestead First
Homestead protection can vanish before closing if the property is treated as abandoned. Abandonment in Texas requires two things at once: you stop using the property as your residence, and you form a clear intention not to return. A temporary absence for work, medical treatment, or travel doesn’t qualify on its own. There has to be real evidence you’ve given up the property as your home.
The most common way sellers stumble into this is by buying and moving into a new home before the old one sells. Once you’ve established a new primary residence, arguing the first property is still your homestead gets much harder. The burden of proving abandonment falls on whoever raises the claim, usually a creditor trying to strip the property of its protections.
If the homestead claimant is married, neither spouse can abandon the homestead without the other’s consent.10State of Texas. Texas Property Code 41.004 – Abandonment of a Homestead That mirrors the sale rule. An abandoned homestead loses its creditor protection, which means the six-month proceeds shield would not apply to the sale that follows.