Capital gains tax

If you sell your Florida home for more than you paid for it, the profit may be subject to a federal capital gains tax.

Because Florida doesn’t tax income, you won’t be subject to an additional state capital gains tax. “That’s a huge benefit,” explains Abby Nelson, a top-rated Orlando area real estate agent with more than 20 years of experience. “It just falls into the federal capital gains tax implications, but there’s no state-level capital gains tax here in Florida.”

This benefit applies even if you live out of state and own a summer or vacation home in Florida.

The federal amount you owe depends on various factors, including how long you’ve owned the property and your income level. However, there are exemptions available for primary residences, which can significantly reduce or eliminate your capital gains tax liability. (More on exemptions in a minute.)

Capital gains are the profits made when you sell an appreciable asset, such as your house. For example, if you buy a home for $300,000 and sell it for $500,000, you have a capital gain of $200,000.

On the federal level, gains can be considered either short-term or long-term.

• Short-term capital gains are when you sell an asset within a year of purchasing it. Those gains are included in your ordinary income and taxed according to your tax bracket.
• Long-term capital gains are any profits made from the sale of an asset after at least a full year of ownership. For a home sale, those gains are taxed according to the following table.

2024 capital gains tax brackets (long-term capital gains)

The table below shows the long-term capital gains rates for tax year 2024. Single filers can qualify for the 0% long-term capital gains rate with a taxable income of $47,025 or less. Married couples filing jointly can qualify with an income of $94,050 or less.

Capital gains tax exclusion

Most homeowners can take advantage of the capital gains tax exclusion, a tax break for home sellers who meet certain conditions. This is a statutory exclusion on profits from the sale of your family home. The maximum amount of capital gain that can be excluded is $250,000 for single filers or $500,000 for a married couple filing jointly.

According to IRS Publication 523, to qualify for the full exclusion amount, the following criteria must be met:

• The home being sold is your primary residence.
• You’ve owned the home for at least two years in the five-year period before selling it.
• You’ve lived in the home for at least two years within the five-year period before selling it. The years you’ve lived in it don’t need to be consecutive. Certain exceptions to this rule are made for those who are disabled or those in the military, Foreign Service, intelligence community, or Peace Corps.
• You didn’t acquire the home through a like-kind exchange (also known as a section 1031 exchange) within the past five years. This is basically when you swap one investment property for another.
• You haven’t claimed the exclusion on another home in the past two years.
• You aren’t subject to expatriate tax (a government fee paid by those who renounce their citizenship or take up residency in another country).