I don't know the tax code well enough but I believe that's a complete whole other thing at the federal level (not state) as it is the sale profit reported to the IRS and there are special rules regarding whether you owned it as a primary residence, how long you owned it, did you use the profit to purchase a new primary residence, etc. This was one of the things they asked at closing, how are you going to use the profit - for us it was for a down payment on a more expensive house with the rest going to renovations of our new primary residence which they said would basically render the capital gains moot.