Do You Pay Taxes When You Sell a House in Florida?
Navigate the financial landscape of selling your Florida home. Understand the tax implications and obligations that apply to you.
Selling a home in Florida involves financial considerations beyond the sale price. While Florida does not impose a state income tax on real estate sales, sellers typically face federal tax obligations and specific state-level fees.
Federal Capital Gains Tax on Home Sales
When you sell a home for more than you paid for it, the profit is considered a capital gain. This gain is subject to federal capital gains tax, which varies based on how long you owned the property. Assets held for one year or less result in short-term capital gains, taxed at ordinary income tax rates. Assets held for more than one year yield long-term capital gains, which receive preferential tax rates.
The Section 121 exclusion allows capital gain from a primary residence sale to be excluded from taxable income. To qualify, you must have owned and used the home as your main residence for at least two of the five years leading up to the sale. This two-year period does not need to be continuous. Single filers can exclude up to $250,000 of gain, while married couples filing jointly can exclude up to $500,000. This exclusion can reduce or even eliminate the federal tax liability for most home sellers.
Long-term capital gains tax rates for 2025 are 0%, 15%, or 20%, depending on your overall taxable income. Any depreciation claimed on the property, such as if a portion was used for business or rental purposes, may be subject to recapture at a 25% rate and cannot be excluded under Section 121.
Calculating Your Taxable Gain
Taxable gain starts with your home’s adjusted basis. Adjusted basis includes your original purchase price, acquisition costs, and capital improvements. Improvements like additions, major renovations (e.g., new roof, kitchen remodel), and system upgrades (e.g., HVAC, plumbing) increase your basis. These are distinct from routine repairs, which maintain the property but do not add to its value or prolong its useful life.
Selling expenses also reduce your taxable gain. These include:
- Real estate agent commissions
- Legal fees
- Title insurance premiums
- Appraisal fees
- Survey fees
- Advertising
- Escrow fees
- Transfer taxes paid by the seller
These expenses are subtracted from the sale price, lowering the profit subject to tax.
Net capital gain is calculated by subtracting total selling expenses and your adjusted basis from the sale price. For example, if you sell your home for $400,000, incurred $25,000 in selling expenses, and your adjusted basis is $200,000, your net capital gain would be $175,000 ($400,000 – $25,000 – $200,000). This gain is then evaluated against the Section 121 exclusion limits to determine any taxable amount.
Florida Specific Taxes and Fees
Florida does not impose a state income tax, so there is no state-level capital gains tax on residential real estate sales. However, other state-specific fees and charges apply to real estate transactions.
The primary state-level charge is the Florida Documentary Stamp Tax, also known as a transfer or deed tax. It is levied on documents transferring an interest in Florida real property. For deeds, the tax rate is $0.70 for each $100 of consideration. While typically paid by the seller, this tax is negotiable in the sales contract.
Property taxes in Florida are paid in arrears, at the end of the year. At closing, these taxes are prorated between the buyer and seller, ensuring each party pays for their ownership period. The seller provides a credit to the buyer for their ownership period before closing. This proration is a common closing cost, usually based on the previous year’s tax amount if the current bill is unavailable.
Reporting Requirements
Even if your home sale qualifies for the Section 121 exclusion and no tax is owed, the transaction must be reported to the Internal Revenue Service (IRS). The closing agent or title company issues Form 1099-S, “Proceeds From Real Estate Transactions,” reporting gross proceeds and transaction date to the IRS.
Sellers report the sale on their federal income tax return using Schedule D (Capital Gains and Losses) and Form 8949 (Sales and Other Dispositions of Capital Assets). Form 8949 details each transaction’s acquisition and sale dates, purchase price, and sales price. This information is summarized on Schedule D to calculate any taxable gain or loss.
For foreign sellers, FIRPTA imposes withholding requirements. If the seller is foreign, the buyer must withhold 15% of the gross sales price and remit it to the IRS. This ensures capital gains tax collection from foreign individuals or entities selling U.S. real property. Exceptions exist for reduced withholding, but FIRPTA compliance is important for both buyers and sellers.