Capital Gains Tax When
Selling a Home in Florida
Florida has no state capital gains tax. But federal rules still apply. Here's what South Florida sellers need to know to minimize their tax liability and maximize net proceeds.
Florida has no state capital gains tax.
Florida is one of only nine states with no state income tax. Which means no state-level capital gains tax on the sale of your home. However, federal capital gains taxes still apply, and how much you owe depends on how long you owned the home, how you used it, and your total gain.
The good news: most primary residence sellers in South Florida owe nothing in capital gains taxes, thanks to the IRS Section 121 exclusion.
The IRS Section 121 Exclusion, How Most FL Sellers Pay $0
If the home you're selling is your primary residence, the IRS allows you to exclude a significant portion of your gain from capital gains taxes:
To qualify, you must have owned and used the home as your primary residence for at least 2 of the last 5 years. For most South Florida sellers. Especially those who bought in Boynton Beach in 2018 for $350K and are selling today for $580K. The $230K gain falls well within the exclusion.
When You Might Owe Federal Capital Gains
If your gain exceeds the exclusion ($250K/$500K), you'll owe federal capital gains tax on the excess. Long-term capital gains rates (for property held over one year) are 0%, 15%, or 20% depending on your taxable income. In 2025, most middle-income sellers fall in the 15% bracket. There is also a 3.8% Net Investment Income Tax for high earners (over $200K single / $250K married).
Investment Properties: No Exclusion Available
The Section 121 exclusion does not apply to rental or investment properties. If you're selling a Florida investment property, you'll owe federal capital gains tax on the full gain. Long-term rates (0–20%) apply if held over a year. Many investors use a 1031 exchange to defer these taxes by rolling proceeds into a like-kind property.
Reduce Your Gain With Cost Basis Adjustments
Your taxable gain is the sale price minus your adjusted cost basis. Which includes your original purchase price plus capital improvements (new roof, addition, remodel) minus depreciation (for investment properties). Keeping records of every improvement you've made to your South Florida home can reduce your taxable gain significantly.
Consult a CPA Before You Close
This guide covers general principles. Your personal tax situation. Income, filing status, home use history, and prior exclusion use. Determines your actual liability. Consult a qualified CPA or tax attorney before closing, especially on gains over $200,000.
Sell for 1% and keep more equity.
After taxes and commissions, your net proceeds are what matter. At 1% listing fee, we help South Florida sellers keep thousands more than traditional 3% agents.