You’ve probably heard the rumor. People move to Florida specifically to escape taxes. And honestly, it’s mostly true. We don’t have a state income tax, which is a massive win for anyone selling a house. But here’s the thing—Uncle Sam doesn’t care about Florida’s "no state tax" sunshine.
Even in the Sunshine State, the federal government is still waiting at the finish line to take a piece of your profit. If you're selling a condo in Miami or a beach house in Destin, you need to know exactly how Florida capital gains tax on real estate actually works in 2026. It’s not just about what the state takes; it’s about what the IRS leaves you with.
The "Zero Percent" Florida Myth
Let’s get the big one out of the way. Florida does not have a state-level capital gains tax. If you sell a property for a $200,000 profit, Tallahassee is not going to send you a bill for a percentage of that gain.
However, you aren't "tax-free." You still owe federal capital gains tax. For most people, this is the part that hurts. The IRS sees that profit as taxable income. Depending on how long you held the property and how much money you make overall, you could be looking at a federal tax rate of 0%, 15%, or 20%.
Short-Term vs. Long-Term: The 366-Day Rule
Timing is basically everything. If you flip a house in six months, the IRS considers that a "short-term" gain. They treat that money exactly like your paycheck. You’ll pay your ordinary income tax rate, which can go as high as 37% for top earners.
Hold it for at least one year and one day? Now you’re in "long-term" territory. For the 2026 tax year, the long-term rates are much friendlier. Most middle-income sellers fall into the 15% bracket. If your total taxable income (including the gain) is under $49,450 as a single filer, you might even hit that elusive 0% rate.
💡 You might also like: Business Model Canvas Explained: Why Your Strategic Plan is Probably Too Long
The $250k / $500k Primary Residence Shield
The biggest "get out of jail free" card is the Section 121 exclusion. It’s the holy grail of real estate tax planning. Basically, if the property was your main home, you can exclude up to $250,000 of the gain from taxes if you're single. If you’re married filing jointly, that number jumps to $500,000.
To qualify, you need to pass the "2-out-of-5-years" test. You must have owned and lived in the house as your primary residence for at least two of the five years before the sale.
Expert Note: Those two years don’t have to be consecutive. You could live there for a year, rent it out for two, and then move back in for another year before selling. As long as the days add up to 730 within that five-year window, you're usually golden.
Why Your "Basis" Is Your Best Friend
Most people calculate their gain by subtracting the purchase price from the sale price. That’s a mistake that costs thousands. You should be using your adjusted basis.
Your basis starts with what you paid for the home, but it grows with every "capital improvement" you make. A new roof? Add it to the basis. Impact windows to survive hurricane season? Add those too. Landscaping, new central AC, or a kitchen remodel all count.
📖 Related: Why Toys R Us is Actually Making a Massive Comeback Right Now
When you increase your basis, you decrease your taxable gain. If you bought a house for $400,000 and spent $100,000 on a massive renovation, your basis is $500,000. If you sell for $600,000, your taxable gain is only $100,000—not $200,000. It pays to keep those Home Depot receipts.
Don't Forget the Closing Costs
You can also bake in your selling expenses. Commissions paid to agents, title insurance, and even those annoying documentary stamp taxes Florida loves to charge. Speaking of which, Florida’s "Doc Stamps" are $0.70 per $100 of the sale price in most counties (Miami-Dade is a bit different at $0.60). On a $500,000 sale, that's $3,500 right there that effectively reduces your taxable profit.
Investment Properties and the Recapture Trap
If you’re selling a rental property, things get way more complicated. You can’t use the $250k/$500k primary residence exclusion unless you lived there. Plus, you have to deal with depreciation recapture.
The IRS assumes you’ve been "depreciating" the house over 27.5 years to lower your annual taxes. When you sell, they want some of that back. This "recaptured" depreciation is usually taxed at a flat 25%. It’s a sneaky tax that catches Florida investors off guard every single year.
The 1031 Exchange: The Only Real Escape
If you’re a serious investor, you’ve probably heard of the 1031 exchange. It’s a way to sell a property and "roll" the profit into a new one without paying any capital gains tax immediately.
👉 See also: Price of Tesla Stock Today: Why Everyone is Watching January 28
There are strict rules, though. You have 45 days to identify a new property and 180 days to close. If you miss a deadline by even one hour, the IRS will hit you with the full tax bill. It’s high-stakes, but for building long-term wealth in Florida real estate, it’s the gold standard.
What’s Changing in 2026?
The tax landscape in 2026 is feeling the ripples of the "One Big Beautiful Bill Act" passed back in 2025. While Florida’s state stance remains "leave them alone," federal brackets have shifted for inflation.
For 2026, the 15% long-term capital gains bracket starts at $49,451 for individuals and $98,901 for married couples. If you’re a high-income earner, don’t forget the Net Investment Income Tax (NIIT). It’s an extra 3.8% tax on top of your capital gains if your income exceeds $200,000 (single) or $250,000 (married).
Actionable Steps for Florida Sellers
- Audit Your Receipts: Go through your records for the last five years. Any permanent improvement to the property should be documented to raise your basis.
- Check the Calendar: If you are at the 11-month mark of owning a property, wait. Selling at day 367 instead of day 360 could literally save you 15-20% in taxes.
- Consult a Pro for Recapture: If the property was ever a rental, your tax math is going to be messy. Get a CPA who understands Florida-specific nuances, especially regarding how our lack of state tax affects your federal filing.
- Calculate Doc Stamps Early: Budget for the $0.70 per $100 transfer tax so it doesn't surprise you at the closing table.
Florida remains one of the best places in the country to sell real estate because the state stays out of your pocket. But staying "tax-smart" means looking past the state line and keeping your federal liability as low as humanly possible.