Taxes on Selling a House in Florida: What to Expect

If you are planning to sell a home in South Florida, understanding the south florida capital gains tax on real estate is one of the most important steps you can take before listing. The tax picture here is genuinely favorable compared to most states, but federal rules still apply, and a few costs at closing catch sellers off guard every year. This guide breaks down exactly what you owe, what you can exclude, and what to watch for whether you are selling a primary home, a rental, or an investment property.

Florida has no state income tax on home sales

The single biggest advantage of selling real estate in Florida is that the state levies no income tax whatsoever. That means no state-level capital gains tax on your profit. States like California tax capital gains as ordinary income at rates up to 13.3%. In Florida, that number is zero.

This is not a loophole or a temporary break. Florida's constitution prohibits a personal income tax, so the benefit is structural. Whether you net $50,000 or $500,000 on a sale, Florida takes nothing from that gain. Federal taxes are another matter entirely.

Federal capital gains tax: the primary residence exclusion

The federal government taxes profit from real estate sales, but most homeowners qualify for a significant exclusion under Section 121 of the Internal Revenue Code.

How the exclusion works

If the property was your primary residence for at least 2 of the last 5 years before the sale, you can exclude up to $250,000 of capital gain if you file single, or $500,000 if you file married filing jointly. This exclusion resets every two years, so you can use it more than once over a lifetime of moves.

Example: You bought a home in Boca Raton in 2018 for $400,000. You sell in 2025 for $750,000. Your gain is $350,000. As a married couple, your entire gain falls under the $500,000 exclusion. You owe zero federal capital gains tax on that profit.

Long-term vs. short-term capital gains rates

If you do not qualify for the exclusion, or if your gain exceeds the exclusion limit, the rate you pay depends on how long you owned the property.

• Short-term gains (property owned less than 1 year) are taxed as ordinary income. Depending on your bracket, that rate ranges from 10% to 37%.
• Long-term gains (property owned 1 year or more) receive preferential rates: 0%, 15%, or 20%, depending on your taxable income.

Most homeowners who have lived in their property for several years fall into the long-term category. For a married couple with combined taxable income under $583,750 in 2025, the long-term rate is 15%.

The Net Investment Income Tax (NIIT)

High-income sellers face an additional 3.8% surtax called the Net Investment Income Tax. It applies to the lesser of your net investment income or the amount by which your modified adjusted gross income (MAGI) exceeds these thresholds: $200,000 for single filers and $250,000 for married filing jointly.

For a rental property sale with a large gain, this 3.8% can add up quickly. A $300,000 gain on an investment property could generate $11,400 in NIIT alone, on top of regular capital gains tax. Primary residence gains excluded under Section 121 are not subject to NIIT, which is another reason the exclusion matters.

Depreciation recapture on rental properties

If you are selling a rental property rather than a primary home, depreciation recapture is a major tax consideration that surprises many investors.

When you own a rental, the IRS lets you deduct depreciation each year as a paper expense. Residential rental property depreciates over 27.5 years. If you have owned a rental for 10 years, you have likely deducted tens of thousands of dollars in depreciation against your rental income.

When you sell, the IRS "recaptures" those deductions. Depreciation recapture is taxed at a maximum rate of 25%, separate from the capital gains rate on your remaining profit. This applies even if you claimed the depreciation passively or through a property manager.

Example: You bought a Fort Lauderdale rental for $300,000. Over 10 years, you claimed $90,000 in depreciation. When you sell, $90,000 of your gain is subject to 25% recapture tax, not the standard long-term capital gains rate. That is $22,500 in recapture tax before you calculate gains on the rest of the profit.

Many investors avoid or defer this tax entirely through a 1031 exchange, covered in the next section.

The 1031 exchange: deferring taxes on investment property

A 1031 exchange (named for Section 1031 of the tax code) lets you sell one investment property and defer all capital gains and depreciation recapture taxes by rolling the proceeds into a "like-kind" replacement property. The rules are strict, but the benefit is enormous for active investors.

Key 1031 exchange rules

• You must identify the replacement property within 45 days of the sale closing.
• You must close on the replacement property within 180 days of the sale.
• A qualified intermediary must hold the proceeds. You cannot touch the money between the sale and the purchase.
• The replacement property must be equal or greater in value to the property sold. Buying down creates a "boot," and you pay tax on that portion.
• Primary residences do not qualify. The sold property must be held for investment or business use.

South Florida is an active 1031 exchange market. Investors frequently sell appreciated condos or single-family rentals in Broward or Palm Beach County and exchange into commercial property, multi-family buildings, or land in the same or nearby markets. A qualified intermediary and a real estate attorney familiar with Florida's closing process are essential for a clean exchange.

Documentary stamp tax: what Florida charges at closing

While Florida collects no income tax, the state does charge a documentary stamp tax on the deed transfer when a property sells. In most of Florida, the rate is $0.70 per $100 of the sale price, which equals 0.70% of the purchase price.

Miami-Dade County charges a slightly higher rate: $0.60 per $100 for the deed, plus an additional $0.45 per $100 surtax (on properties other than single-family homes), for a total of $1.05 per $100 in some cases. On a single-family home in Miami-Dade, the combined rate equals $0.60 per $100.

In South Florida's price ranges, this tax is significant. On a $600,000 sale in Palm Beach County, the doc stamp tax is $4,200, and by custom in Florida, the seller pays this cost. It appears as a line item on your closing disclosure.

Florida also charges documentary stamp tax on mortgage notes at the rate of $0.35 per $100 of the loan amount, but this is typically a buyer-side cost when they finance the purchase.

Prorated property taxes at closing

Florida property taxes run on a calendar year but are paid in arrears. When you close, your attorney or title company will calculate the exact number of days you owned the property in the calendar year and credit the buyer for your share of that year's tax bill, which they will pay later.

This proration shows up as a credit to the buyer and a debit to the seller on the closing statement. On a home with $8,000 in annual property taxes, selling on June 30 means you owe roughly $4,000 in prorated taxes at closing. It does not change your ultimate tax liability for the year, but it affects your net proceeds on closing day.

If you have an escrow account through your mortgage servicer, your lender will reconcile those funds after closing. You will typically receive any escrow balance back within 30 days of payoff.

Other closing costs that reduce your taxable gain

Your capital gain is calculated on net proceeds minus your adjusted basis, not on the gross sale price. Several selling costs reduce the gain you actually owe tax on.

Costs that directly reduce your gain include:

• Real estate commission (typically 2.5% to 3% per side in South Florida, though structures vary widely post-settlement)
• Title insurance you pay as the seller
• Attorney fees for the closing
• Transfer taxes and documentary stamps
• Any seller-paid repairs or concessions documented in the contract
• Capital improvements you made to the property during ownership (not routine maintenance)

Keeping records of every capital improvement you made over the years, from a kitchen renovation to a new roof, is important because each one adds to your cost basis and reduces the taxable gain. A home bought for $350,000 with $80,000 in documented improvements has an adjusted basis of $430,000, not $350,000.

Use the Florida closing costs calculator to get a realistic estimate of your full selling expenses before you decide on a list price.

When to consult a CPA

This article gives you a working framework, but tax situations vary in ways that require a professional's eye. Consult a CPA before selling if any of these apply:

• Your gain is likely to exceed the Section 121 exclusion limit
• You are selling a property that was ever used as a rental, even partially
• You are considering a 1031 exchange
• You are a non-resident alien or foreign national (FIRPTA withholding rules apply)
• You received the property as an inheritance (step-up in basis rules apply)
• Your household income is above $200,000 and NIIT may apply

A good CPA who works with real estate investors in South Florida can often identify strategies that save far more than their fee. The tax code has legitimate tools available, and knowing which ones fit your situation before you list is worth the time.

When you are ready to move forward, our team at Pure Equity Realty can connect you with experienced South Florida real estate attorneys and CPAs who work with our clients regularly. Start by requesting a home valuation or visiting our home sale calculator to see what your net proceeds might look like after taxes and closing costs.

Frequently asked questions

Do I pay capital gains tax when I sell my primary home in Florida?

Florida charges no state capital gains tax. For federal taxes, most homeowners qualify for the Section 121 exclusion: $250,000 in gain is excluded for single filers, $500,000 for married couples filing jointly, provided you lived in the home as your primary residence for at least 2 of the last 5 years. If your gain stays below those limits, you owe no federal capital gains tax either.

What is the documentary stamp tax in Florida, and who pays it?

Florida's documentary stamp tax is charged on the deed transfer at closing. The rate is $0.70 per $100 of the sale price (0.70%) in most counties, including Palm Beach, Broward, and St. Lucie. Miami-Dade uses a slightly different structure. By closing custom in Florida, the seller pays this tax. On a $500,000 sale, that is $3,500.

I rented my house for a few years before selling it. Does the exclusion still apply?

Possibly, but it gets complicated. You must have used the property as your primary residence for at least 2 of the last 5 years. If you rented it out and then moved back in, you may still qualify for a partial exclusion. However, any depreciation you claimed during the rental period is subject to recapture at up to 25%, regardless of the exclusion. A CPA can calculate exactly how the two rules interact for your situation.

What is a 1031 exchange and can anyone use it?

A 1031 exchange lets you defer capital gains and depreciation recapture taxes when selling an investment property by rolling the proceeds into a replacement investment property of equal or greater value. It is not available for primary residences. The rules require a qualified intermediary, a 45-day identification window, and a 180-day closing deadline on the replacement property. It is a powerful tool for investors who want to keep capital working rather than paying a large tax bill.

How does the Net Investment Income Tax affect home sellers in South Florida?

The NIIT is an additional 3.8% federal tax on investment income for high earners: single filers above $200,000 MAGI and married filers above $250,000 MAGI. For investment property sales, this tax can apply to the capital gain. For primary residence sales, the portion of the gain covered by the Section 121 exclusion is not subject to NIIT. The portion above the exclusion limit may be, depending on your income level.

Can I deduct real estate commissions from my capital gain?

Yes. Selling costs, including real estate commissions, title fees, attorney fees, and documentary stamp taxes you pay as seller, all reduce your net proceeds and directly lower your taxable gain. Keep all closing disclosures and settlement statements from the sale. If you made capital improvements during ownership, document those as well, since they increase your cost basis and reduce the gain further.