Florida Homestead Exemption & Selling Your Home: The Complete 2026 Guide
Your Florida homestead exemption saves you thousands in property taxes every year. But what happens when you sell? Can you transfer it? Will you lose your Save Our Homes cap? Here's everything you need to know.
⚡ Quick Answer
When you sell your Florida homestead, your exemption ends on that property. But thanks to portability, you can transfer up to $500,000 of your Save Our Homes benefit to a new Florida home. You have 3 tax years to use it. The type of sale — cash buyer, MLS, or FSBO — does not affect your exemption or portability rights.
📋 What's in This Guide
1. What Is Florida's Homestead Exemption?
Florida's homestead exemption reduces the taxable value of your primary residence by up to $50,000. Here's how it breaks down:
✅ Homestead Exemption Breakdown
- First $25,000 exemption applies to all property taxes (county, city, school district, special districts)
- Second $25,000 applies to assessed values between $50,000–$75,000, but excludes school district taxes
- Net savings: roughly $750–$1,500 per year depending on your millage rate
- Available to permanent Florida residents on their primary residence only
But the real value isn't the $50,000 exemption — it's the Save Our Homes cap that limits how fast your assessed value can rise.
2. Save Our Homes: The Real Money Saver
Save Our Homes (SOH) caps annual increases in your home's assessed value at the lesser of 3% or the Consumer Price Index (CPI). Over time, this creates a massive gap between your assessed value and market value:
| Scenario | Market Value | Assessed Value | SOH Benefit |
|---|---|---|---|
| Bought 5 years ago | $400,000 | $320,000 | $80,000 |
| Bought 10 years ago | $500,000 | $310,000 | $190,000 |
| Bought 20 years ago | $600,000 | $250,000 | $350,000 |
Why This Matters When Selling
If you've owned your Florida home for 10+ years, your SOH benefit could be worth $150,000–$350,000 in reduced assessments. That translates to $3,000–$7,000 per year in property tax savings. When you sell, you don't want to lose this — and with portability, you don't have to.
Capital Gain = Sale Price − Selling Costs − Adjusted Basis
Your adjusted basis includes:
- Original purchase price
- + Closing costs when you bought (title insurance, recording fees, etc.)
- + Capital improvements (new roof, kitchen remodel, additions — NOT routine maintenance)
- − Depreciation claimed (if it was a rental property)
📊 Example
You bought for $250,000, spent $5,000 on closing costs and $40,000 on a new roof and kitchen. Your adjusted basis is $295,000. You sell for $450,000 with $15,000 in selling costs. Your gain: $450,000 − $15,000 − $295,000 = $140,000.
3. The $250K / $500K Primary Residence Exclusion
This is the most important tax break for homeowners. Under IRC Section 121, you can exclude:
$250K
Single filers
$500K
Married filing jointly
Requirements to Qualify:
- Ownership test: You owned the home for at least 2 of the last 5 years
- Use test: You lived in the home as your primary residence for at least 2 of the last 5 years
- Frequency test: You haven't used this exclusion in the past 2 years
💡 What This Means in Practice
A married couple selling a Florida home they bought for $300,000 and selling for $750,000 would have a $450,000 gain. Since that's under the $500,000 exclusion, they owe $0 in federal capital gains tax. Combined with Florida's $0 state tax, they keep every penny of profit.
4. 2026 Federal Capital Gains Tax Rates
If your gain exceeds the exclusion (or you don't qualify for it), here are the federal rates:
| Holding Period | Tax Rate | Who Pays |
|---|---|---|
| Short-term (≤ 1 year) | 10% – 37% | Taxed as ordinary income |
| Long-term (> 1 year) | 0%, 15%, or 20% | Based on taxable income |
| NIIT Surcharge | +3.8% | Income over $200K single / $250K married |
| 2026 Long-Term Rate | Single Filer Income | Married Filing Jointly |
|---|---|---|
| 0% | Up to ~$47,000 | Up to ~$94,000 |
| 15% | $47,001 – $518,900 | $94,001 – $583,750 |
| 20% | Over $518,900 | Over $583,750 |
5. Depreciation Recapture (Rental Properties)
If you're selling a rental or investment property, there's an additional tax consideration. Any depreciation you claimed (or could have claimed) is subject to depreciation recapture at a flat 25% rate.
⚠️ Example: Depreciation Recapture
You bought a rental for $300,000 and claimed $50,000 in depreciation over the years. Your adjusted basis is now $250,000.
If you sell for $400,000, your total gain is $150,000. Of that, $50,000 is taxed at 25% (depreciation recapture = $12,500), and the remaining $100,000 is taxed at your long-term capital gains rate.
This is one reason many landlords use 1031 exchanges instead of selling outright.
6. 1031 Exchanges for Investment Properties
A 1031 exchange (also called a "like-kind exchange") lets you defer all capital gains taxes by reinvesting the proceeds into another investment property. Key rules:
- Only for investment/business property — your primary residence does NOT qualify
- 45-day identification window: You must identify replacement properties within 45 days of selling
- 180-day closing deadline: You must close on the replacement property within 180 days
- Use a Qualified Intermediary (QI): You cannot touch the sale proceeds — they must go through a third-party QI
- Equal or greater value: The replacement property must be equal or greater in value to fully defer taxes
💡 Tired Landlord Tip
If you're selling a rental property and don't want to do a 1031 exchange, selling to a cash buyer like FL Home Buyers can be simpler. We close fast, buy as-is, and handle the tenants. You'll owe capital gains, but the savings in commissions, repairs, and hassle often offset a portion of the tax bill.
7. Florida Homestead & Tax Implications
Florida's homestead exemption reduces your property tax while you own the home, but it also has implications when you sell:
- Save Our Homes (SOH) cap: Limits annual assessed value increases to 3%. When you sell, the new owner loses this cap — their taxes may be significantly higher.
- Portability: You can transfer up to $500,000 of your SOH benefit to a new Florida homestead. This only applies if you buy another Florida home within 3 years.
- Creditor protection: Florida homestead provides unlimited creditor protection during ownership, but this ends at sale.
✅ Key Takeaway
If you're selling one Florida home to buy another, make sure to file for portability with your county property appraiser within 3 years. This can save you thousands per year in property taxes on your new home.
8. Frequently Asked Questions
Does Florida have a capital gains tax?
No. Florida has no state income tax, so there's no state-level capital gains tax. You only owe federal capital gains tax.
How much is the capital gains exclusion for a home sale?
$250,000 for single filers, $500,000 for married filing jointly. You must have owned and lived in the home for at least 2 of the last 5 years.
What is the capital gains tax rate on real estate in 2026?
Long-term (held over 1 year): 0%, 15%, or 20% depending on your income. Short-term: taxed as ordinary income (up to 37%). High earners may also owe 3.8% Net Investment Income Tax.
Can I avoid capital gains tax with a 1031 exchange?
Yes — but only for investment/rental properties. You must identify a replacement property within 45 days and close within 180 days. Primary residences don't qualify.
Does selling to a cash buyer change my tax liability?
No. Whether you sell to a cash buyer, on the MLS, or FSBO, your capital gains tax is the same. Selling to a cash buyer simply gets you your money faster with fewer selling costs — the tax treatment is identical.
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