How to Avoid Capital Gains When Selling Your Home in Florida

If you sell your Florida home for a higher price than you originally paid for it, the profit may be subject to a federal capital gains tax. The amount you’d owe depends on several factors, such as how long you’ve owned the property, and your current income. 

However, you may qualify for Florida’s capital gains tax exclusion, which could potentially eliminate your entire capital gains tax liability altogether. 

What are Capital Gains?

Capital gains are the profits you make when you sell an appreciable asset, like real estate. For example, let’s say you bought your home for $600,000 and you eventually sell it for $1,000,000. In this case, you’d have a capital gain of $400,000. 

How Does The Capital Gains Exclusion Apply In Florida?

In the state of Florida, you can significantly reduce or even eliminate your entire federal capital gains tax liability if the property you’re selling has been your primary residence for at least two out of the last five years of ownership. 

The maximum amount of capital gain that can be excluded for single filers is $250,000, compared to $500,000 for a married couple filing jointly. This is because the federal capital gains tax only applies to gains of over $250,000 for single filers, or $500,000 for married couples. 

For instance, let’s say the sale of your home resulted in a capital gain of $400,000. A single filer who qualifies for the capital gains exclusion would be able to exclude $250,000 from that amount, meaning they’d only have to pay taxes on the leftover profit of $150,000. 

If a married couple had sold this home, they’d be able to exclude up to $500,000, meaning they’d end up paying no taxes on the sale whatsoever. 

To be clear, if you generated less than $250,000 as a single filer or $500,000 as a married couple in profits from selling your home, you wouldn’t owe any capital gains taxes at all. 

How Do You Qualify for The Capital Gains Exclusion?

In order to qualify for the exclusion, the property you’re selling must meet certain conditions, such as:

• You’ve owned the home for at least two years before selling it. 
• You’ve lived in the home for at least two years before selling it. These years don’t have to be consecutive, and certain exemptions can be made for individuals who are either disabled or in the military, intelligence community, or Peace Corps.
• You didn’t acquire the home through a like-kind exchange (a.k.a. swapping one investment property for another ) within the past five years. 
• You haven’t claimed the capital gains tax exclusion for another property within the past two years. 

Capital Gains Tax Exclusion Example

Let’s say you bought a house in Miami for $550,000 in 2014. You lived in the home as your primary residence until 2024, at which point you sold the home for $1,250,000. Since the home was your primary residence and you’re a single filer, you would qualify for the $250,000 exclusion for the first $250,000 of capital gains, meaning you would have to pay any income taxes on the remaining $450,000 of capital gains generated from the sale of your home. 

As you can see, the capital gains exclusion isn’t very difficult to qualify for. 

If you’re thinking of selling your home and you want to know what you can expect to make, a great first step is contacting a local real estate team, and the Kern Team is happy to help. We can explain exactly what kind of upgrades can make the biggest impact on your home’s perceived value, ensuring your time, effort, and money are spent wisely. 

So, get in touch and we’ll go everything you  need to know before listing your home.