The Sunshine State offers many benefits to individuals looking to buy and sell real estate property. If you plan to sell a home, an apartment, or another type of real estate asset in Florida, it is critical to understand how much taxes you owe. Find out what taxes Florida levies on the sale of a home and how the Sunshine State’s real estate taxation system compares to other states.
Do You Pay Capital Gains Tax When Selling a Home in Florida?
According to the Florida Department of Revenue, the State of Florida does not levy individual income taxes, nor do they tax capital gains on individuals who sell real estate or any other type of asset.
The 2 Levels of Florida Taxes on Real Estate
Like in most other states, individuals selling real estate property in Florida are taxed on multiple levels. However, selling a home in Florida involves fewer layers of taxation than in the average state, with just two types of real estate taxes.
Federal Capital Gains Taxes
Rate: Varies from 0% to 20%, depending on the taxpayer’s situation. The most common rate is 15%.
You must pay federal capital gains tax when selling real estate in Florida. The IRS defines two types of capital gains: short-term and long-term. It is considered a short-term capital gain if you have owned the property for one year or less before selling it. If you’ve held it for over a year, it is a long-term capital gain instead.
Short-term capital gains are taxed as ordinary income, meaning the tax brackets for this type of gain are identical to those for standard federal income taxes.
Long-term capital gains tax brackets are calculated based on the seller’s filing status and income levels:
- 0% for taxpayers meeting the following conditions:
- The taxpayer’s filing status is “Single” or “Married Filing Separately” and their taxable income of $41,675 or less
- The taxpayer’s filing status is “Married Filing Jointly” or “Qualifying Surviving Spouse,” and their taxable income of $83,350 or less
- The taxpayer’s filing status is “Head of Household” and their taxable income of $55,800 or less
- 15% for taxpayers meeting the following conditions:
- The taxpayer’s filing status is “Single,” and their taxable income is over $41,675 but $459,750 or less
- The taxpayer’s filing status is “Married Filing Jointly” or “Qualifying Surviving Spouse,” and their taxable income is over $83,350 but $517,200 or less
- The taxpayer’s filing status is “Married Filing Separately,” and their taxable income is over $41,675 but $258,600 or less
- The taxpayer’s filing status is “Head of Household,” and their taxable income is over $55,800 but $488,500 or less
- 20% for taxpayers exceeding the maximum thresholds outlined for each respective filing status in the 15% category (e.g., taxpayer filing as single and earning over $459,750)
Paragraph 121 of the Internal Revenue Code (IRC) outlines exceptions to long-term capital gains taxes. Sellers can exclude up to $250,000 (or $500,000 for married couples filing jointly) on the gains realized following the sale of their home if they pass the “ownership and use tests.” You qualify for this exclusion if:
- The house sold was your primary residence
- You owned the home for two years or more
- You lived in the home and used it as your primary address for two years or more
How is the Federal Capital Gains Tax Calculated?
According to the National Association of Realtors, the median period of homeownership in the United States is 13 years. While the exact duration varies by area, it typically falls between 6 and 21 years. These stats show that most individuals selling a home in the United States will pay long-term federal capital gains taxes.
Example: Thomas is a single taxpayer earning $150,000 annually. He owned and lived in a single-family home in Daytona Beach, FL, which he bought for $400,000, then used as a primary residence for six consecutive years before deciding to sell his property. When he sold it, the final sale price was $585,000, meaning Thomas realized $185,000 of capital gains. Due to the length of homeownership, the IRS categorizes these gains as long-term.
His filing status and taxable income place him in the 15% tax bracket and require him to pay $27,750 of federal capital gains taxes. However, IRC Paragraph 121 allows him to exclude up to $250,000 on the gains he realized from the tax because his property passes the ownership and use tests. The capital gains do not exceed the $250,000 threshold, allowing him to exclude 100% of his gains and sell his house without paying federal capital gains taxes.
Florida State Capital Gains Tax
Rate: 0%
Florida does not have a capital gains tax, but you still have to pay federal taxes if you sell a home in the state. Since Florida doesn’t have capital gains, the rules default to the federal guidelines. The exact tax rate you pay depends on several factors, including your income and how long you owned your property.
Florida Transfer Taxes
Rate: 0.7%, except in Miami-Dade County: 0.60% to 1.05%
While Florida does not impose taxes on the profits realized after selling a capital asset, the state imposes the Documentary Stamp Tax, which taxes transfers of real property in Florida or interests thereof, such as transfers of property deeds.
The standard Documentary Stamp Tax rate is 70 cents per $100 of the property’s total consideration. An exception applies to transfers completed in Miami-Dade County, where the standard tax rate is 60 cents per $100 plus a surtax of 45 cents per $100. With the surtax, the total transfer tax is effectively $1.05 per $100 in the total consideration amount.
The state does not levy the surtax on single-family dwellings, reducing the transfer taxes for these properties to the Miami-Dade standard rate of $0.60 per $100.
Regardless of the county corresponding to the property being transferred, the state’s tax legislation specifies that while the Documentary Stamp Tax is payable by any of the involved parties, all parties are liable for the tax. This rule applies regardless of whether the involved parties decide to split payment of the tax or one pays 100% of it.
How is the Florida State Transfer Tax Calculated?
Most individuals selling a home in Florida pay the same flat rate to pay the Documentary Stamp Tax. However, sellers in Miami-Dade County pay a different rate than the rest of the state. This rate varies depending on the type of dwelling they’re selling.
Example 1: Thomas’s house is in Daytona Beach, a part of Volusia County in Florida. When selling his home to Rosa, the final consideration amount (in this case, the sale price) was $585,000. Upon transferring the deed to Rosa, both parties became liable for the Documentary Stamp Tax. Since the house is not located in Miami-Dade County, the rate is 70 cents per $100, meaning the tax owed for this transfer is $4,095. Thomas and Rosa agree to split the tax payment equally, meaning each pays $2,047.50.
Example 2: Vincent owns a single-family house in Coral Gables, a city in Miami-Dade County, Florida. Vincent chose to sell it to Robert for a final purchase price of $730,000. Because the house is a single-family home in Miami-Dade County, the Documentary Stamp Tax for the transfer does not include the surtax, meaning the rate is only $0.60 per $100. The taxes owed for this transfer are only $4,380 instead of the $7,665 that would have been levied for other property types. Vincent and Robert decide to split the tax payment equally, meaning each pays $2,190.
Florida Exemptions and Deductions for Real Estate Taxes
Because Florida has no capital gains taxes or individual income taxes, the state offers fewer possibilities for exemptions and deductions than most other states.
Florida Capital Gains Exemptions
The State of Florida does not tax capital gains and has no state income tax, so it also does not tax capital gains as income. Consequently, there are no exemptions to capital gains taxes in Florida.
Florida Transfer Tax Exemptions
Florida’s state tax legislation (Florida Administrative Code 12B-4.014) outlines the types of transfers exempt from the Documentary Stamp Tax. Common exemptions include the following:
1. Gifts and Transfers With No Consideration
Per section 2B-4.014(2) of the Florida Administrative Code, transfers of unencumbered property without consideration or a symbolic consideration are not taxable under Florida law. An example of a symbolic consideration is “love, affection, and $1,” suggesting the transfer was a gift.
2. Security for Debt
Transfers of property subject to a reconveyance deed, such as the type used to secure a debt, are not subject to the Documentary Stamp Tax.
3. Will Transfers
Deeds transferred by a personal representative of a deceased previous owner are not subject to the Documentary Stamp Tax when transferred to the next owner in accordance with the terms of the previous owner’s will.
4. Transfers Between Agent and Principal
If a property owner has legally designated another person as their agent, any transfers of property between the principal and the agent are exempted from the Documentary Stamp Tax.
5. Transfers to and from Federal Government Entities
The law states the United States and its agencies are exempt from paying the Documentary Stamp Tax. If the other party in the transfer is non-exempt, they are fully liable for tax payment.
6. Transfers Between Federal and State Government Agencies
If the federal government, the state government, or any of their agencies and instrumentalities transfer property to another federal or state government or any entity thereof, the transfer is exempted from the Documentary Stamp Tax.
7. Partition Deeds
According to Florida real estate legislation, partition deeds are generally not taxable under the Documentary Stamp Tax, unless under the specific circumstances outlined in Section 2B-4.014(6) of the Florida Administrative Code.
8. Eminent Domain
The State of Florida may not subject property transferred to a new entity following a judgment or decree of eminent domain to the Documentary Stamp Tax. Transfers to government entities under threat of condemnation are also not subject to the tax.
Florida Real Estate Taxes vs. Other States
Real estate taxation in Florida is among the least restrictive in the United States due to the state not imposing a capital gains tax or any form of individual income tax. Below is a breakdown of other states’ real estate tax systems and how they compare with Florida.
Pennsylvania
The state and local real estate taxes in Pennsylvania include taxation of capital gains, state-level transfer taxes, and local-level transfer taxes.
Capital Gains Tax Rate: Taxed as income, 3.07%
Pennsylvania legislation treats capital gains as income, subjecting them to the state’s individual income tax. According to the Pennsylvania Department of Revenue, the state levies a flat income tax rate of 3.07%. Individuals filing taxes in Pennsylvania may use a dedicated section of the state’s income tax form, Form PA-40, to report net gains and income from the dispositions of property, such as the sale of real estate.
Transfer Tax Rate: 1% of the property’s value levied by the state + Variable rate by the county (typically 1%)
The state of Pennsylvania taxes transfers of real estate property using the Realty Transfer Tax (RTT). Two versions of the tax are levied on individuals transferring property: a state-level RTT and a local-level RTT.
The state-level RTT equals 1% of the property’s final consideration amount at the time of transfer. Pennsylvania counties and localities impose the local-level RTT, and while the rate may vary, most counties charge a rate equal to 1% of the property’s final consideration amount.
New York
New York’s real estate taxation system works on two levels: the state treats capital gains realized on the sale of a home as income, then taxes any property transfers from one taxable party to another. The Empire State’s laws do not distinguish between short-term and long-term capital gains, using a complex multi-tiered system to determine the taxes owed by each individual realizing capital gains.
Capital Gains Tax Rate: Taxed as income, 4%-10.9%
Because capital gains are treated as income, New York taxes sellers using its three-tiered system, which includes fixed tax tables, tax rate schedules, and tax computation calculators. While the exact amount of taxes owed depends on the seller’s taxable income and filing status, the rates in the New York State tax schedule tables range from 4% to 10.9%.
Transfer Tax Rate: 0.4% + 1% of the property’s sale price if over $1 million
New York state law uses two transfer taxes: a base rate calculated for all transfers and an additional tax that only applies to high-value properties known as the mansion tax. The base rate taxes $2 for every $500 or fraction thereof in the final consideration amount, making it approximately equivalent to 0.4%. The mansion tax is levied on top of the base rate and is 1% of the property’s final sale price.
Ohio
In Ohio, real estate taxes include the taxation of capital gains as income and a two-tiered transfer tax rate system.
Capital Gains Tax Rate: Taxed as income, 0%-3.99%
According to the Ohio Revised Code (5747.20(B)(2)), capital gains realized from the sale of a home or real estate property in Ohio are treated as non-business income. All non-business income is subject to the state’s standard income tax. Ohio levies income taxes according to a five-bracket system ranging from 0% to 3.99%, depending on the taxpayer’s taxable income.
Transfer Tax Rate: 0.1% from the state, 0.1%-0.3% from the county
In addition to treating capital gains as income, Ohio’s state government levies the Real Property Conveyance Fee on all real property transfers. The standard tax rate is equal to one mill (0.1%), or $1 for every $1,000 in the property’s final consideration amount.
On top of the state’s Real Property Conveyance Fees, each county may levy up to 3 mills (0.3%) on property transfers.
When Do You Pay Capital Gains Tax on Florida Real Estate?
Because Florida does not levy state-level capital gains taxes, an individual selling their home and realizing a capital gain in the Sunshine State will only need to pay the federal capital gains tax which is reported on your individual tax return.
Short-Term vs. Long-Term Capital Gains Tax Rate in Florida
Florida law does not distinguish between short-term and long-term capital gains. The state also does not levy different rates for each category because the state does not impose any taxes on capital gains or individual income.
How to Avoid Capital Gains Taxes on Home Sales in Florida
Florida’s relatively permissive real estate taxation legislation makes it one of the most advantageous states for buying and selling real estate. If you wish to avoid or limit the amount of capital gains taxes you owe in Florida, the only strategies at your disposal are ways to reduce the federal-level taxes due to the lack of state-level equivalents.
Strategy #1: Federal Exclusion of Long-Term Capital Gains
According to the IRS, you can exclude up to $250,000 (or $500,000 if married and filing jointly) of the gains realized from the sale of a home, provided the home was your primary residence. You can prove your home was a primary residence by passing the ownership and use tests, which require you to pass the following:
- Ownership test: You have owned the home for at least two years before the sale. Documents such as a deed and title insurance may constitute valid proofs of ownership.
- Use test: You must show proof of occupancy, meaning you have lived in the home and used it as your primary residence for at least two years before the sale. Documents used to prove occupancy are outlined in federal proof of occupancy guidelines.
Although it is not required for the ownership and usage periods to be consecutive, you must be able to prove both ownership and use of the home within five years of the sale. Additionally, you must not have used this exclusion for another home in the last two years.
Example: Thomas is a single taxpayer living in a single-family home in Daytona Beach, FL. He has lived at this address as his primary residence for six years. As a single taxpayer, he may use the federal exclusion to exclude up to $250,000 of capital gains realized on the sale of his Daytona Beach home. Because he initially bought the home for $400,000 and then sold it for $585,000, he realized a capital gain of $185,000.
He submits documentation to the IRS proving that he has owned and lived in the house in the past two years, allowing him to pass the ownership and use tests and exclude up to $250,000 of capital gains from the federal capital gains tax. Because his capital gain is under the $250,000 threshold, he can exclude the entire amount, allowing him to avoid paying the tax.
How to Report Your Property Sale for Taxes in Florida
After selling a home in Florida, it is critical to report the sale to the relevant state and federal authorities.
IRS Forms
To report the sale of your home to the IRS, you must submit two forms: IRS Schedule D (Form 1040) and IRS Form 8949.
Form 8949 requires you to report whether your gains are long-term or short-term. Short-term gains must be listed under Part I, whereas long-term gains must be listed in Part II. If you can exclude the gains you’ve realized with a specific property, enter the letter code “H” in column (f) on the line corresponding to that property, then write the corresponding adjustment amount in parentheses and as a negative in column (g).
After completing Form 8949, enter the corresponding information regarding short-term and long-term gains in IRS Schedule D (Form 1040). Part I lets you enter short-term gains, whereas Part II is for long-term gains.
Florida Department of Revenue Tax Forms
There is no requirement to report the sale of a home to the state government in Florida, and the Florida Department of Revenue does not provide a form specifically for reporting home sales.
FAQs
Here are the answers to some common questions about capital gains taxes in Florida when selling a residence.
Yes, but not at the state level. The state of Florida does not charge capital gains taxes on the sale of a home, whether or not you choose to reinvest the proceeds of the sale into a similar property (such as for a Section 1031 like-kind exchange). If you complete a like-kind exchange, you can defer payment of federal capital gains taxes.
Yes. Land is a different type of capital asset than real estate property. While Florida won’t charge capital gains tax on the sale, if you realize a capital gain on the sale of land in Florida, the federal government will tax your gain.
No. In the past, federal legislation allowed senior citizens over the age of 55 to avoid paying capital gains taxes on a home sale. With the passage of the Taxpayer Relief Act of 1997, the federal government repealed the “over-55” home sale exemption. It was replaced by the current legislation, which allows homeowners to exclude up to $250,000 (or $500,000 for married taxpayers filing jointly) of the capital gains realized on the sale of a primary residence.
They can be both. Depending on your home state, you may owe both federal and state capital gains taxes after selling a capital asset, such as a home. In Florida, the only capital gains taxes that apply are federal.
It depends on the state and the taxing entity. Since Florida pays capital gains tax at the federal level, they are added to your Adjusted Gross Income (AGI) after reporting the sale using IRS Schedule D (Form 1040). If you sell a home in Florida, you’ll only need to pay federal capital gains taxes.
No. According to the IRS, all capital gains are taxable. However, specific types of capital losses are deductible, such as losses realized on business and investment property. You cannot deduct losses realized on personal-use property.
No. Florida legislation does not impose taxes on capital gains, whether you are selling a primary residence or a secondary home.
You realize a capital loss if you’ve earned less than you paid for the property at closing. Capital losses are not subjected to capital gains taxes. However, they can be deducted. According to federal law, you can only deduct losses on a home sale if you used the property for business or investment purposes.
You must have owned and used the home as your primary residence for at least two years to benefit from the federal exclusion of capital gains taxes. The period of ownership does not need to be the same as the period of usage, and each period does not have to be consecutive. If you are single and qualify, you can exclude up to $250,000 from the capital gains realized on the sale. If you are married and filing jointly, you can exclude up to $500,000.
Florida has no age-related provisions to avoid capital gains taxes because the state does not levy taxes on any capital gains realized.
