Yes, you can sell part of your property, but not the way you’d sell the whole thing. The piece you want to sell has to first become its own legally recognized parcel through a process called a lot split or minor subdivision, and that requires local government approval, a professional survey, and (if you have a mortgage) your lender’s cooperation. Once the new parcel exists on paper, the sale itself looks like a normal closing, though the tax bill can be a surprise if you haven’t planned for it.
Three Things to Check Before You Spend Any Money
Surveys, applications, and legal work aren’t cheap, and there are three deal-killers that can stop a lot split before it starts. Check them first.
Deed restrictions. Restrictive covenants written into the property’s chain of title can prohibit subdivision or set minimum lot sizes larger than what local zoning allows. These can be decades old and still enforceable, and they don’t always appear in your current deed. A full title search is the only reliable way to find them.
HOA rules. If your property sits in a homeowners association, the HOA’s covenants and bylaws may independently block or limit dividing lots, on top of anything the government requires.
Your mortgage. Selling any part of a mortgaged property is almost certainly a problem without your lender’s consent. Federal law defines a due-on-sale clause as one that lets a lender demand full repayment if “all or any part of the property” is sold or transferred without prior written consent.1Office of the Law Revision Counsel. 12 USC 1701j-3 – Preemption of Due-on-Sale Prohibitions The familiar exceptions (transferring to a spouse, into a living trust) don’t cover selling a subdivided piece to a third party. You need what’s called a partial release of the mortgage lien.
Getting Your Lender to Release Part of the Collateral
Your mortgage is a lien on the entire property. Carving off a parcel shrinks the lender’s collateral, so no lender is required to agree. You have to request a partial release, and lenders decide case by case.
Fannie Mae’s servicing guidelines give a sense of how strict this can be. The loan generally must be current, must have been in place more than 12 months, and can’t have been more than 30 days late more than once in the prior year. If the loan-to-value ratio after the split would stay under 60 percent, the servicer can approve. Above that, the borrower has to pay down the balance enough to hold the LTV where it was before the split (or at 60 percent, whichever is higher). A new appraisal is typically required.2Fannie Mae. Evaluating a Request for the Release, or Partial Release, of Property Securing a Mortgage Loan
Not every lender uses that framework, and some simply refuse. If yours does, your options narrow to paying off the mortgage, refinancing, or dropping the idea. Ask early. Finding out after you’ve paid for a survey and application fees is an expensive way to learn.
The Lot Split: Zoning, Surveys, and Approvals
Local government controls how land is divided. The rules live in two places: zoning ordinances and subdivision regulations, both administered by your city or county planning and zoning department. That office is the right first call once you’ve cleared the deed and mortgage questions.
Zoning ordinances set the minimums each new parcel has to meet. Common ones include minimum lot size (in square feet or acres), minimum road frontage so the parcel has street access, and setback distances that dictate how far any structure has to sit from the new property lines. If your proposed split would create a parcel that fails any of these, you’ll need a variance, which is a separate approval with no guaranteed outcome.
Subdivision regulations govern how the division actually happens. They spell out what counts as a subdivision, what documents you file, and what infrastructure the new parcel has to have. Many jurisdictions require connections to public water and sewer, and the planning commission can condition approval on installing sidewalks, curbing, stormwater drainage, or utility runs.
The Survey and the Plat
The centerpiece of any application is a professional land survey. A licensed surveyor establishes the exact boundaries of the proposed parcel and produces a plat map with dimensions, acreage, and a legal description. Costs vary widely with parcel size, terrain, and local rates, running from several hundred to several thousand dollars, and higher for large or complex properties.
If the new parcel doesn’t touch a road, you’ll need to create a permanent access easement across the land you’re keeping. Easements are also required when utility lines, water pipes, or sewer connections have to cross retained land to reach the new lot. These documents need careful drafting, because once recorded they run with the land and bind future owners.
Infrastructure and Environmental Requirements
Creating a new parcel often triggers obligations the original property never had. The new lot may need its own water and sewer connections, with hookup fees and installation costs to match. Where municipal sewer isn’t available, the lot needs a septic system, which means the soil has to pass a percolation test or the more detailed soil and site evaluation that many jurisdictions now require. If the soil won’t support a septic system with the required backup drain field area, the lot may be unbuildable and the application will be denied.
Stormwater is another common hurdle. Many jurisdictions require a drainage study showing the split won’t push more runoff onto neighboring properties or overwhelm the storm system. Depending on the site, that can mean retention basins, regrading, or new drainage infrastructure before approval.
Application, Hearing, and Timeline
You submit a formal plat application to the planning commission or zoning board with the completed form, multiple copies of the plat map, and a fee that can range from a few hundred to several thousand dollars. Staff reviews for compliance, then most jurisdictions hold a public hearing where the commission takes comment and votes. Approval may come with conditions, such as installing a driveway or connecting utilities, that you have to satisfy before the plat can be recorded. A denial usually spells out which requirements weren’t met, and you can appeal or amend and reapply.
From survey to recorded plat commonly takes several months, and busy jurisdictions or complicated sites can take longer. Build that into your timeline if a buyer is already waiting.
Taxes on the Sale
This is where sellers get caught off guard. When you sell a subdivided parcel, the IRS treats it as a property sale that triggers capital gains tax. Your gain is what the buyer pays minus your allocated cost basis in that specific parcel.3Office of the Law Revision Counsel. 26 USC 1001 – Determination of Amount of and Recognition of Gain or Loss
Splitting Your Cost Basis
Because you’re selling only part of the original tract, you have to divide your total cost basis between the parcel sold and the land kept. The IRS formula multiplies your total cost by a fraction: the fair market value of the sold lot over the fair market value of the entire tract.4Internal Revenue Service. Publication 551 (12/2025), Basis of Assets If you paid $200,000 for the whole property and the sold parcel is worth 30 percent of the total, your basis in that parcel is $60,000. Sell it for $100,000, and your taxable gain is $40,000.
Get the allocation right at the time of the split. If you use the wrong basis and the mistake surfaces after the statute of limitations (generally three years) has expired, the IRS won’t let you fix it.4Internal Revenue Service. Publication 551 (12/2025), Basis of Assets A professional appraisal at the time of the split that values both the sold parcel and the retained land is the best defense if you’re ever audited.
Capital Gains Rates
If you’ve owned the property more than a year, the gain qualifies for long-term capital gains rates, which for 2026 are 0, 15, or 20 percent depending on taxable income. Most sellers land in the 15 percent bracket. Hold the property a year or less and the gain is taxed as ordinary income at your regular rate.
Will the Home Sale Exclusion Help?
Probably not, if you’re only selling a side lot and keeping your house. The Section 121 exclusion can shelter up to $250,000 of gain ($500,000 for married couples filing jointly) on the sale of a primary residence.5Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence Applying it to vacant land sold separately from the house requires that the land be adjacent to your dwelling, that you owned and used it as part of your principal residence, and that you sell the dwelling itself within two years before or after the land sale in a transaction that also qualifies under Section 121.6eCFR. 26 CFR 1.121-1 – Exclusion of Gain From Sale or Exchange of a Principal Residence
That last condition is the one that trips people up. If you plan to keep living in your house and just sell off a portion of the yard, the exclusion doesn’t apply to the land sale and the gain is fully taxable. Even when the exclusion does apply, the combined cap for the house sale and the land sale together is $250,000 or $500,000, not per transaction.7Internal Revenue Service. Publication 523 (2025), Selling Your Home
Closing and Recording
Once the planning commission approves the split, the rest looks like a normal closing. A new deed is prepared containing the precise legal description from the approved plat. Buyer and seller sign a purchase agreement covering price, contingencies, and closing terms, and the buyer will typically order a title search on the newly created parcel to confirm clear ownership.
The recording sequence matters. The approved plat map is recorded with the county recorder of deeds first, which is what makes the new lot a legal reality. The deed transferring the parcel to the buyer is recorded immediately after, because it references a legal description that doesn’t exist in public records until the plat is on file. Once both are recorded, the new parcel and the change in ownership are public record.