Do You Pay Taxes When Selling a House in Florida?

When you sell a house in Florida, everyone wonders the same thing:
“Do I have to pay taxes on this?”

The short answer is maybe.
Florida gives you a huge advantage—no state income tax—but the IRS still wants its cut if you made a profit.
Here’s what actually matters.

1. Florida Doesn’t Charge State Income Tax

Let’s start with the good news.
Florida doesn’t tax your income, which means:

• No state capital gains tax.
• No state tax bill when you sell your home.

That alone makes Florida one of the best states for property owners and investors.
Your only potential tax liability is federal.

2. Federal Capital Gains Tax Still Applies

The federal government taxes your profit, not your sale price.
Your “gain” is the difference between what you sold the house for and your adjusted basis (what you originally paid, plus improvements, minus depreciation if it was a rental).

Two key rules:

• If you owned it more than a year, you pay the long-term capital gains rate (0%, 15%, or 20%, depending on income).
• If you owned it less than a year, it’s a short-term gain, taxed at your ordinary income rate.

Example:
You bought a Palm Beach house for $300,000, put $20,000 into repairs, and sold it for $420,000.
Your gain is $100,000.
That $100,000 may be taxable at your long-term rate unless you qualify for an exclusion.

3. The Homeowner Exclusion That Saves You

The IRS gives homeowners a big break under Section 121.
If the home was your primary residence, and you lived there for at least 2 of the last 5 years, you can exclude:

• Up to $250,000 in profit if you’re single.
• Up to $500,000 if you’re married filing jointly.

Example

You bought for $300,000 and sell for $550,000.
You’re married, lived there 3 years, and meet the ownership rule.
You can exclude the entire $250,000 gain.
No federal tax owed.

If it wasn’t your main home, or you owned it for less than two years, the exclusion usually doesn’t apply.

4. Selling an Investment or Rental Property

This is where most people get tripped up.

If the property was a rental, vacation home, or flip, it’s not your primary residence.
You’ll likely owe tax on the profit.
On top of that, the IRS will “recapture” any depreciation you took while it was a rental, and tax that portion as ordinary income (up to 25%).

So even if you break even on paper, the IRS might still bill you for depreciation you deducted earlier.

How to avoid paying right away

You can defer federal taxes with a 1031 exchange if you reinvest the proceeds into another investment property.
But you have to follow strict IRS timing rules (identify a new property within 45 days, close within 180).

For full-time investors, this strategy keeps equity compounding while deferring the tax hit.

5. Taxes You’ll Still Pay at Closing

Even though Florida doesn’t have an income tax, you’ll still see a few taxes and fees at closing:

If you’re selling an investment property owned by a foreign national, the FIRPTA rule (Foreign Investment in Real Property Tax Act) may withhold up to 15% of the sale price for federal tax.

6. How to Estimate What You’ll Owe

Here’s the fast math method I use with sellers and investors:

1. Start with the sale price.
2. Subtract your closing costs.
3. Subtract your purchase price and improvements.
4. The remainder is your gain.
5. Apply your rate (0%, 15%, or 20%) based on your income bracket.

If you lived in the home as your main residence and qualify for the exclusion, stop there—you likely owe nothing.

If it was a rental, you’ll owe based on gain plus depreciation recapture.

7. Strategies to Reduce or Eliminate Taxes

Here’s what smart sellers do before closing:

• Time your sale after two full years of living there to qualify for the homeowner exclusion.
• Track improvements—new roof, kitchen, plumbing. These raise your basis and lower your taxable gain.
• Consider a 1031 exchange if selling an investment property.
• Keep receipts and closing statements—you’ll need them for the IRS.
• Talk to a CPA before listing. Tax planning works best before the sale, not after.

8. Real Florida Examples

Example 1: Homeowner in West Palm Beach
Bought for $350,000 → Sold for $575,000 → Married couple, lived there 3 years.
Gain: $225,000.
They qualify for the $500,000 exclusion → No tax owed.

Example 2: Investor in Sarasota
Bought for $400,000 → Spent $40,000 on rehab → Sold for $550,000 after 18 months.
Gain: $110,000.
Held more than one year, taxed at 15%.
$16,500 federal tax due (no state tax).

Example 3: Landlord in Fort Lauderdale
Bought for $300,000 → Depreciated $27,000 → Sold for $420,000.
Gain: $147,000 (including recapture).
$27,000 taxed at 25%, remainder at 15%.
Approx. $26,000 federal tax.

9. Simple Checklist Before You Sell

• Confirm if it’s your primary residence.
• Check how long you’ve owned and lived in it.
• Calculate your basis (purchase + improvements).
• Estimate gain after closing costs.
• Review if you qualify for the homeowner exclusion.
• If rental, account for depreciation.
• Decide if a 1031 exchange makes sense.
• Get advice from a Florida CPA.

10. The Bottom Line

Here’s the straight truth:
Florida won’t charge you state tax when you sell your house.
But the federal government still might, depending on your profit and how you used the property.

If you lived in the home, meet the 2-of-5-year rule, and stay under the exclusion limits, you can walk away tax-free.
If it was an investment or rental, plan for federal capital gains and depreciation recapture.

Selling in Florida is still one of the most tax-friendly moves you can make—you just have to know the rules before you close.

At FL Home Buyers, we help homeowners and investors sell fast, understand their numbers, and walk away clean.
If you’re planning to sell and want clarity on timing, value, or cash offers, visit FLHomeBuyers.com and start with a no-pressure consultation.