Taxes When Selling a House in Florida

Taxes when selling a house are usually smaller than sellers expect, and in Florida often nothing at all. Most people selling a main home pay no federal tax on the gain, and the state has no income tax to add to it. What follows is why, where the exceptions are, and which numbers to have ready. General information, not advice about your own return.

Taxes when selling a house in Florida: the state part

Florida has no state income tax, so there is no state tax on the gain from selling your house. What Florida does charge is a transfer tax at the moment of sale. That is the documentary stamp tax on the deed, at $0.70 per $100 of the sale price, and in most counties the seller pays it. It is a closing cost rather than an income tax. It is owed whether you made a gain or a loss, which is why the two get confused so often.

The exclusion that removes taxes when selling a house

Federal law lets you exclude up to $250,000 of gain on the sale of a main home if you file single, and up to $500,000 if you are married filing jointly. To qualify you generally need to have owned the home and used it as your main home for two of the five years before the sale. The two years do not have to be continuous. This is the provision that leaves the great majority of ordinary home sales with no federal tax bill at all. It is also the reason most of what follows will not apply to you.

Taxes when selling a house turn on the gain, not the price

A house that sells for $600,000 is not a $600,000 taxable event. The gain is the sale price, less what you paid, less the cost of capital improvements, less the costs of selling. Take an example. You bought at $300,000, put $60,000 into a new kitchen and roof, and paid $25,000 in closing costs and fees on the way out. The gain is $215,000, not $600,000. For a married couple that sits comfortably inside the exclusion, and the tax is nothing.

What counts towards your basis

The purchase price, plus the capital improvements you made over the years. A new roof, an addition, a replaced air conditioning system, impact windows, a pool. Repairs and maintenance do not count. Repainting a bedroom and fixing the dishwasher are not improvements, however much they cost at the time. The rough test is whether the work added something lasting or simply kept the house as it was. Keep receipts, because this is the number that most often goes unclaimed. Sellers who have owned a Florida house for twenty years often have tens of thousands of improvements they cannot document. Undocumented improvements are improvements you cannot use.

Selling costs come off as well

The documentary stamp tax, the title charges you paid, the settlement fee, recording, any listing fee and anything you paid a buyer agent all reduce the gain. So does a repair credit you gave at closing. This is the quiet argument for keeping the complete closing package rather than just the final figures. Every one of those lines is a number you may want years later, when the gain is actually being calculated.

When you can use the exclusion again

Generally once every two years. If you excluded gain on another main home within the two years before this sale, you usually cannot claim the full exclusion again. Partial exclusions exist for sales driven by a change in employment, by health, or by certain unforeseen circumstances. Each has its own rules. If you have sold a home recently, that is a specific question to put to a CPA before you set a closing date.

The former rental complication

If the house was ever a rental and you claimed depreciation, that depreciation is recaptured when you sell and the exclusion does not cover it. It is taxed separately, at a rate that differs from ordinary capital gains. This catches Florida sellers often, because so many houses here have spent a season or two as a rental. A property rented for part of your ownership needs a professional to work out the split. The figure is rarely intuitive and guessing at it is not worth the risk.

Taxes when selling a house you never lived in

The main home exclusion applies to a main home. A pure investment property, a second home you never lived in, or a flip does not get it, and the gain is taxable in the ordinary way. Whether it is a short or long-term gain depends on how long you held it. There are deferral structures that apply to investment property and not to residences, and that is another conversation for a tax professional rather than a page like this one.

The 1099-S you will probably receive

The closing agent generally reports the sale to the federal tax authority on a 1099-S, and sends you a copy. Receiving one does not mean you owe anything, and sellers are regularly alarmed by it for no reason. It means the sale was reported, and if the gain is covered by the exclusion there is often nothing to pay. In some cases the reporting is not required at all, where the seller certifies that the sale qualifies for the full exclusion. Either way, keep the form with your closing documents.

Taxes when selling a house as a non-resident

If the seller is a foreign person for tax purposes, the buyer is generally required to withhold a percentage of the sale price at closing under the federal rules usually called FIRPTA. That withholding is not the tax. It is a prepayment against whatever the eventual liability turns out to be. Often it exceeds the real figure, and the difference is recoverable on a return. Anyone in this position should have advice lined up before the contract is signed rather than after.

What your accountant needs on taxes when selling a house

Your original closing statement from when you bought the house. Receipts or records for every capital improvement. The settlement statement from this sale. The 1099-S if you get one. Dates you lived in the property, and dates it was rented if it ever was. Depreciation schedules if you claimed any. Six items. Gathering them at closing is far easier than reconstructing them in April, when the people who could answer have moved on and the records are in a box somewhere.

Where this page stops

This is general information about how the rules work, not advice about your situation, and the thresholds and rates in it change over time. A main home sale inside the exclusion is usually straightforward. A former rental, a recent previous sale, an inherited property, a divorce or a foreign seller are different. In each of those the answer depends on facts a page cannot know about you. Those are worth an hour of a CPA time before the closing date is set.

Tax: common questions

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