Will I Owe Capital Gains Tax When I Sell My House in Florida?
Short answer: Most Florida homeowners who sell the home they have lived in for years owe little or no federal capital gains tax. If you owned and lived in the home for at least two of the last five years, you can generally exclude up to $250,000 of profit ($500,000 for a married couple filing jointly), according to IRS Publication 523. Florida has no state income tax, so there is no state tax on the gain. Long-time owners with large gains can still owe tax on the amount above the exclusion, which is why good records of past improvements matter.
The home sale exclusion: the $250,000 / $500,000 rule
Section 121 of the tax code lets you leave some or all of the profit from selling your main home off your tax return. According to IRS Publication 523 (Selling Your Home), to qualify for the full exclusion you generally must pass three tests:
- Ownership: you owned the home for at least 24 months (2 years) out of the 5 years before the sale.
- Use: you lived in it as your main home for at least 24 months out of those same 5 years. The months do not have to be in a row.
- Timing: you have not used the exclusion on another home sale in the 2 years before this one.
For a married couple filing jointly to claim the full $500,000, either spouse can meet the ownership test, but both spouses must meet the use test.
One rule matters a great deal for seniors. If you become physically or mentally unable to care for yourself, IRS Publication 523 explains that time spent living in a licensed care facility, such as a nursing home, can count toward the 2-year use test, as long as you lived in the home for at least 12 months of the 5-year period. That can help a family that sells a parent's home after the parent has moved into care.
Cost basis: why your old receipts are worth money
Your taxable gain is not the sale price minus what you paid. It is the amount you receive after selling costs, minus your adjusted basis. Basis starts with your purchase price plus certain purchase closing costs, and it goes up with improvements.
The IRS draws a clear line. Improvements that add value, extend the home's life, or adapt it to new uses count, such as an added bedroom or bathroom, a new roof, or a new heating and air system. Routine repairs, such as painting, fixing a leak, or replacing broken hardware, do not.
Michael, who is also a Florida Certified Building Contractor, sees this often: a roof replacement, a remodeled kitchen, or a screened lanai added years ago can be forgotten by sale day. Gathering invoices, permits, and contracts before you list can lower the gain you report.
A worked example with real arithmetic
Here is a hypothetical Lutz homeowner. The numbers are for illustration only.
- Purchased in 1995 for $120,000, plus $3,000 of purchase closing costs = $123,000 starting basis
- Documented improvements: new roof $14,000 + kitchen remodel $38,000 + new AC system $9,000 + screened lanai $16,000 = $77,000
- Adjusted basis: $123,000 + $77,000 = $200,000
- Sale price: $650,000. Assume total selling costs (negotiated commission, doc stamps, title, and other closing costs) of $40,000.
- Amount realized: $650,000 − $40,000 = $610,000
- Gain: $610,000 − $200,000 = $410,000
If a married couple files jointly: the $410,000 gain is under the $500,000 exclusion, so none of it is taxable.
If a single or widowed owner files alone (and the surviving spouse rule below does not apply): $410,000 − $250,000 = $160,000 of taxable long-term gain.
Without improvement records: the basis would be only $123,000, the gain would be $610,000 − $123,000 = $487,000, and the single owner's taxable gain would be $487,000 − $250,000 = $237,000. Keeping the paperwork removed $77,000 from the taxable gain. At a 15% rate, that is $77,000 × 0.15 = $11,550 in federal tax.
2026 federal capital gains rates and the 3.8% surtax
Any gain above your exclusion on a home you owned more than a year is taxed at long-term capital gains rates. For tax year 2026, the thresholds published by the IRS in IRS Revenue Procedure 2025-32 (released October 2025) are based on taxable income:
- 0% rate: up to $49,450 (single), $98,900 (married filing jointly), $66,200 (head of household)
- 15% rate: above those amounts, up to $545,500 (single), $613,700 (married filing jointly), $579,600 (head of household)
- 20% rate: above those amounts
Some sellers also owe the 3.8% net investment income tax. According to IRS Topic No. 559, it applies when modified adjusted gross income is above $200,000 (single or head of household), $250,000 (married filing jointly or qualifying surviving spouse), or $125,000 (married filing separately). The IRS notes these thresholds are not indexed for inflation. The good news: the part of your home gain that is excluded under Section 121 is not subject to this tax. Only the taxable portion can be.
Widowed, or selling an inherited home
Surviving spouse rule. According to IRS Publication 523, a surviving spouse can still use the full $500,000 exclusion if the home is sold within 2 years of the spouse's death, the survivor has not remarried at the time of sale, and the other requirements are met. In the example above, that single timing decision is the difference between $0 and $160,000 of taxable gain. If you have recently lost a spouse, please talk with a CPA before choosing a listing date.
Inherited homes (stepped-up basis). When you inherit a home, the IRS guidance on gifts and inheritances says your basis is generally the home's fair market value on the date of death (or on an alternate valuation date if the estate elects it). If Mom bought the house for $90,000 and it was worth $400,000 when she passed, the heirs' basis is generally $400,000. Selling soon afterward for about that amount usually produces little or no gain. A written appraisal as of the date of death is worth getting.
Florida has no state income tax, and the federal proposals are not law
According to the Florida Department of Revenue, Florida does not impose a personal income tax, so there is no state capital gains tax on your home sale. Your concern is federal tax only.
You may have seen headlines about ending the tax on home sales. As of September 2026, these are proposed bills, not law:
- The No Tax on Home Sales Act (H.R. 4327, introduced July 2025) would remove federal capital gains tax on the sale of a main home. A June 2026 review by FiscalFold reported it was still in the House Ways and Means Committee.
- H.R. 7034 (introduced January 13, 2026) would remove the dollar limits on the exclusion. According to GovInfo bill status, it was referred to Ways and Means.
- The More Homes on the Market Act (H.R. 1340) would raise the exclusion to $500,000 single and $1 million joint and index it to inflation.
Until a bill passes both chambers and is signed, the $250,000 / $500,000 rules apply. Plan with today's law.
Questions people also ask
Do I have to report my home sale to the IRS?
Often not, if your entire gain is excluded and you did not receive a Form 1099-S. If you receive a 1099-S or have a taxable gain, you report the sale. Your CPA can confirm based on your paperwork.
Can I use the exclusion if I moved into assisted living?
Possibly. If you became unable to care for yourself, time in a licensed care facility can count toward the 2-year use test, as long as you lived in the home for at least 12 months of the 5-year period. In some cases, a partial exclusion may be available even if you fall short of two years.
Does buying a new home let me avoid the tax?
No. The old "roll over" rule no longer exists; it was replaced by the Section 121 exclusion. Buying another home does not defer tax on a gain above your exclusion.
Is my home sale gain subject to Florida tax?
No. Florida has no personal income tax. Federal tax is the only income tax question on the gain.
Talk it through with Michael
If you are thinking about selling a long-time home, for yourself or for a parent, Michael is glad to help you think through timing, records, and next steps alongside your CPA. There is no cost and no pressure. Book a free 15-minute call, or call (813) 453-0108. If your home is in Lutz (33549) or nearby, he can also share what similar homes have sold for.
This article is general information only and is not legal, tax, or financial advice. Tax rules depend on your full situation; please consult a CPA or tax attorney before selling, and an estate attorney for inherited property. Michael E. Siebel is a Realtor with LPT Realty.
Last updated: September 2026