Do You Have to Pay Property Gains Tax in Florida? 

Selling a property in Florida can be exciting and complex, especially when considering property gains tax Florida implications. You might wonder: “Do I have to pay Property Gains Tax in Florida? And the answer is no. The State of Florida does not charge this tax to its residents. However, understanding how the federal capital gains tax affects your real estate transactions and what strategies you can implement to minimize the amount you pay is fundamental for making informed decisions and maximizing your returns when selling a property in Florida.

Do I Have to Pay Property Gains Tax in Florida?

In Florida, while there isn't a state-imposed capital gains tax due to the absence of a state income tax, residents are still subject to federal capital gains taxes on profits from property sales. This means that any gains realized from selling property in Florida are taxed at the federal level, not the state level.

What Is the Capital Gains Tax

Capital gains tax is a tax you pay on the profit you make when selling a capital asset, like a home, stocks, or other investments. The amount you owe depends on how long you owned the asset before selling it and your overall income.

• Short-Term Capital Gains: If you sell an asset within a year of buying it, the profit is taxed as ordinary income. This means the tax rate can range from 10% to 37%, depending on your total taxable income.

• Long-Term Capital Gains: If you own the asset for more than a year before selling, the tax rate is lower—either 0%, 15%, or 20%—based on your income and filing status.

In Florida, there is no state capital gains tax, which means you only need to consider federal capital gains tax. If you're selling your primary residence, you may also qualify for a capital gains tax exclusion—up to $250,000 for single filers and $500,000 for married couples filing jointly—if you meet the IRS ownership and residency requirements. This can significantly reduce or eliminate what you owe when selling your home.

Federal Capital Gains Tax Obligations for Florida Residents

Federal capital gains tax rates for 2025 are as follows:

Short-Term Capital Gains in Florida

Long-Term Capital Gains in Florida

Factors Impacting Your Capital Gains Tax in Florida

Understanding the factors influencing your capital gains tax liability is key to effective tax planning and maximizing the benefits from your property investments in Florida.

• Duration of Ownership: Holding a property for more than a year qualifies you for long-term capital gains rates, which are generally lower than short-term rates.​

• Income Level: Your taxable income determines the specific capital gains tax rate applicable to you.​

• Depreciation Recapture: For rental properties, any depreciation claimed may be subject to recapture and taxed at higher rates upon sale.​

• Investment in Opportunity Zones: Reinvesting gains into Qualified Opportunity Funds can defer or potentially reduce capital gains tax liability.​

• Primary Residence Exclusion: If the property sold was your primary residence for at least two of the five years preceding the sale, you may exclude up to $250,000 of the gain ($500,000 for married couples filing jointly) from your taxable income.

How the Primary Residence Exclusion Affects Your Capital Gains Tax

The IRS provides a tax benefit called the Section 121 Exclusion, which allows homeowners to exclude a portion of their capital gains when selling their primary residence. To qualify, you must meet the following requirements:

1. You must have owned the home for at least two years within the five years before the sale (Ownership Test).

2. You must have lived in the home as your primary residence for at least two years within that same five-year period (Use Test).

These years do not have to be consecutive. For example, if you lived in the home for a year, rented it out for three years, and then moved back in for another year before selling, you could still qualify.

The maximum exclusion is:

• $250,000 for single filers

• $500,000 for married couples filing jointly

What the IRS Considers a Primary Residence

To determine if a home qualifies as your primary residence, the IRS looks at factors such as:

• Where you live the most compared to other properties you own

• Proximity to your workplace

• The address listed on your tax returns, driver's license, and voter registration

• Where your family primarily lives

Exceptions and Special Cases

Certain life events may still allow you to qualify, even if you don’t meet the full two-year requirement:

• Divorce or Separation: If a spouse was awarded the home in a divorce, their ownership time may count toward the exclusion.

• Death of a Spouse: If you sell within two years of your spouse’s passing, you may still qualify for the full $500,000 exclusion.

• Unforeseen Circumstances: If you’re selling due to a job change, medical issues, or a natural disaster, you might qualify for a partial exclusion based on how long you lived in the home.

Capital Gains Tax on Investment and Rental Properties

Investment and rental properties are subject to different capital gains tax rules than primary residences.​

For rental or investment properties, there are no capital gains tax exclusions. The primary residence exclusion does not apply to properties not used as your main home. Therefore, profits from the sale of investment or rental properties are entirely subject to capital gains tax.​

How Does The Depreciation Recapture Work?

For rental properties, you've likely claimed depreciation deductions over the years to account for wear and tear. Upon sale, the IRS requires you to "recapture" this depreciation, taxing it at a maximum rate of 25%. This means the portion of your gain equal to the depreciation deductions taken will be taxed separately from the regular capital gains rate.

Strategies You Can Implement to Minimize Capital Gains Tax

Several strategies can help reduce or defer capital gains tax liabilities:​

1. 1031 Exchange

Named after Section 1031 of the Internal Revenue Code, this strategy allows investors to defer capital gains taxes by reinvesting the proceeds from selling one investment property into another "like-kind" property. To qualify, strict timelines and rules must be followed, including identifying a replacement property within 45 days and completing the exchange within 180 days. ​

2. Adjusting Cost Basis

Increasing your property's cost basis can reduce taxable gains. This includes adding the costs of improvements, certain closing costs, and expenses related to the sale. Keeping detailed records of these expenditures is essential. ​

3. The 2-Out-of-5-Year Rule

If you convert a rental property into your primary residence, living in it for at least two of the five years before selling can make you eligible for the primary residence exclusion. However, the portion of the gain attributable to depreciation taken after May 6, 1997, cannot be excluded and is subject to recapture. 

4. Timing of the Sale

Selling the property in a year when your income is lower can place you in a lower capital gains tax bracket. This requires careful planning and consideration of your overall financial situation. 

5. Investing in Opportunity Zones

Reinvesting capital gains into Qualified Opportunity Funds that invest in designated Opportunity Zones can defer and potentially reduce capital gains taxes.

Maximize Your Home Sale by Understanding Florida's Capital Gains Tax

While Florida does not impose a state capital gains tax, homeowners need to recognize that federal capital gains tax obligations still apply when selling property.

Given the intricacies of capital gains tax regulations, consulting with seasoned real estate professionals is highly advisable. The experienced team at Florida Realty Marketplace can provide personalized guidance tailored to your unique situation, helping you make informed decisions throughout the selling process.​

Thinking About Selling? Connect with Our Expert Agents

Selling your home is a big decision—having the right team makes all the difference. Partner with Florida Realty Marketplace for expert insights and a personalized selling strategy. 

See what your home is worth today!

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