How Does Capital Gains Tax Work When Selling Florida Real Estate?
Capital gains tax on the sale of Florida real estate is a federal tax — Florida has no state income tax. Here is how federal capital gains tax applies to the sale of a primary residence, vacation home, or investment property on the Emerald Coast.
How Does Capital Gains Tax Work When Selling Florida Real Estate?
Capital gains tax on the sale of Florida real estate is a federal tax — Florida has no state income tax, which is one of the genuine financial advantages of owning property here. But the federal capital gains tax can be significant, particularly for properties that have appreciated substantially.
This post is for general informational purposes only and does not constitute tax advice. Consult a qualified CPA or tax attorney for guidance specific to your situation.
The Basics: What Is Capital Gain?
Capital gain is the difference between your adjusted basis in the property and the sale price.
Adjusted basis = Purchase price + capital improvements + certain closing costs paid at purchase − depreciation taken (for rental properties)
Capital gain = Sale price − selling costs − adjusted basis
Federal Capital Gains Tax Rates
Short-term capital gains (property held less than 1 year): Taxed as ordinary income — up to 37% depending on your tax bracket.
Long-term capital gains (property held more than 1 year): Taxed at preferential rates:
- 0% for taxpayers in the 10% or 12% ordinary income bracket
- 15% for most taxpayers
- 20% for high-income taxpayers (taxable income above approximately $518,900 for single filers in 2026)
Additionally, high-income taxpayers may owe the Net Investment Income Tax (NIIT) of 3.8% on capital gains from real estate sales.
Primary Residence: The Section 121 Exclusion
If you are selling your primary residence, you may be able to exclude up to $250,000 of capital gain from federal income tax ($500,000 for married couples filing jointly) under IRS Section 121.
Requirements:
- You must have owned the property for at least 2 of the last 5 years before the sale
- You must have used the property as your primary residence for at least 2 of the last 5 years before the sale
- You cannot have used the exclusion on another home sale within the past 2 years
See our post on the primary residence capital gains exclusion for a full breakdown.
Vacation Homes and Second Homes
Vacation homes and second homes that are not your primary residence do not qualify for the Section 121 exclusion. The full capital gain is subject to federal capital gains tax.
Vacation Rental Properties
Vacation rental properties are treated as investment property for tax purposes. The full capital gain is subject to federal capital gains tax, and depreciation recapture applies.
Depreciation recapture: If you have taken depreciation deductions on the rental property, the depreciation you claimed is "recaptured" at closing and taxed at a maximum rate of 25%.
1031 exchange: Sellers of investment properties can defer capital gains tax by reinvesting the proceeds in a like-kind property through a 1031 exchange. See our post on 1031 exchanges for Emerald Coast real estate for a full breakdown.
Florida Has No State Income Tax
Florida does not impose a state income tax on individuals. This means Florida sellers pay only federal capital gains tax — not a state layer on top.
FAQ
Does Florida have a capital gains tax?
No. Florida does not impose a state income tax on individuals, so there is no Florida state capital gains tax. Sellers pay only federal capital gains tax.
How do I calculate my capital gain on a Florida property sale?
Capital gain = Sale price − selling costs − adjusted basis. Your adjusted basis is your purchase price plus capital improvements plus certain closing costs paid at purchase, minus any depreciation taken. Consult a CPA for an accurate calculation.
What is the Net Investment Income Tax?
The NIIT is a 3.8% federal tax on net investment income (including capital gains from real estate sales) for taxpayers with modified adjusted gross income above $200,000 (single) or $250,000 (married filing jointly).
Thinking about selling your Emerald Coast property and want to understand your tax exposure? I always encourage sellers to consult a CPA before listing — I can provide referrals to CPAs who specialize in Florida real estate transactions.
— Kinsey Haddock P.A., Broker Associate | Coldwell Banker Realty — Panhandle | License #BK3253849
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Written by
Kinsey Haddock P.A.Kinsey Haddock P.A. is a Broker Associate and REALTOR® with Coldwell Banker Realty, specializing in coastal real estate across the entire Florida Panhandle — from St. George Island and the Forgotten Coast to Panama City Beach, Scenic Highway 30A, and Destin.