Reference Guide  ·  Last updated July 31, 2026  ·  2026 tax year

Capital Gains When You Sell Your Florida Home

A Boca Raton homeowner who bought two decades ago may be sitting on six or seven hundred thousand dollars of appreciation. The fear of a large tax bill on that gain keeps some of them from ever listing. For most, the tax is far smaller than they expect, and for many it is zero.

What are the numbers for 2026?

Item	Detail
Maximum exclusion, single	$250,000 of gain
Maximum exclusion, married filing jointly	$500,000 of gain
Ownership test	Owned the home at least 24 months within the 5 years before the sale
Use test	Lived in it as your principal residence at least 24 months within the same 5 years
Frequency limit	Cannot have claimed the exclusion on another sale in the 2 years before this one
Long-term capital gains rates	0, 15, or 20 percent depending on taxable income
Net investment income tax	Additional 3.8 percent above $200,000 modified AGI single, $250,000 married filing jointly
Depreciation recapture	Up to 25 percent on gain attributable to prior depreciation
Florida state tax on the gain	None. Florida has no state income tax.
Inflation indexing	None. The $250,000 and $500,000 figures have been fixed since 1997.

Do I qualify for the exclusion?

Three tests, and you need all three.

The ownership test

You must have owned the home for at least 24 months during the 5 year period ending on the sale date. The months do not need to be consecutive.

The use test

You must have used the home as your principal residence for at least 24 months during that same 5 year window. Again, not necessarily consecutive. The count is in days, so 730 days satisfies it.

The frequency test

You cannot have claimed the Section 121 exclusion on the sale of another home during the 2 years before this sale. The clock runs sale date to sale date, not by calendar year.

How is the gain actually calculated?

Gain is not the difference between what you paid and what you sold for. That is the mistake that produces most of the panic. The real calculation subtracts your adjusted basis and your selling costs.

Adjusted basis starts with the purchase price, adds certain purchase closing costs, and adds every capital improvement you made over the years you owned the home. Selling costs, including real estate commission, documentary stamp tax, and title charges, come off the sale price to produce the amount realized.

Gain equals amount realized minus adjusted basis. The exclusion then comes off that gain.

What counts as a capital improvement?

Improvements add to basis. Repairs do not. The distinction is whether the work adds value, extends the life of the property, or adapts it to a new use.

• Generally improvements: a new roof, impact windows, a kitchen or bathroom renovation, a pool, an addition, a new air conditioning system, new flooring, a generator, structural work, landscaping that is part of a larger project.
• Generally repairs: repainting, fixing a leak, replacing a broken appliance, routine servicing, pressure washing.

Keep the receipts. On a long held Boca Raton home the accumulated improvements are frequently six figures, and every documented dollar reduces taxable gain dollar for dollar.

What does this look like in real dollars?

A married couple bought in Boca Raton in 2005 for $385,000, paid about $6,000 in capitalizable purchase costs, and made $145,000 of documented improvements across twenty years. They sell at $1,150,000 with total selling costs of 7 percent.

Why the receipts matter

Same sale, same couple, except they cannot document the improvements.

What rate applies to gain above the exclusion?

Gain above the exclusion is taxed at long-term capital gains rates, assuming you owned the home more than one year. For the 2026 tax year the thresholds are measured against taxable income, meaning income after your standard or itemized deduction.

Filing status	0 percent	15 percent	20 percent
Single	Up to $49,450	$49,451 to $545,500	Above $545,500
Married filing jointly	Up to $98,900	$98,901 to $613,700	Above $613,700

Two points that trip people up. First, the capital gain stacks on top of your ordinary income rather than replacing it, so a large gain can push itself from one bracket into the next. Second, the gain never changes the rate applied to your ordinary income.

Above $200,000 of modified adjusted gross income for single filers, or $250,000 married filing jointly, an additional 3.8 percent net investment income tax may apply. Those thresholds were set in 2013 and are not adjusted for inflation. Gain that is excluded under Section 121 is not subject to it.

The 2026 standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly.

What if the home was ever a rental?

Two separate issues arise, and both reduce the benefit.

Depreciation recapture. Any depreciation you claimed while the property was a rental is not eligible for the exclusion. That portion of the gain is taxed at a maximum rate of 25 percent under Section 1250, regardless of whether you actually claimed the deduction.

Nonqualified use. Periods after 2008 when the property was not your principal residence generally reduce the excludable share of gain proportionally. The math depends on the ratio of nonqualified use to total ownership, and it is genuinely complicated. This is a CPA question, not a rule of thumb.

What if I have not lived there two years?

A partial exclusion may still be available if the sale is driven by a change in place of employment, health reasons, or certain unforeseen circumstances defined by the IRS. The partial amount is prorated based on how much of the 24 month requirement you satisfied.

A voluntary move because you found a house you liked better does not generally qualify.

Are there other situations worth knowing about?

• Surviving spouse. The full $500,000 exclusion remains available if the sale occurs within 2 years of a spouse's death and the joint filing requirements were met before death.
• Divorce. Time a former spouse spent living in the home can sometimes count toward the use test under a divorce or separation instrument.
• Members of the uniformed services. The 5 year window can be suspended during qualified extended duty, up to a statutory limit.
• Home office. If you claimed depreciation on a home office, that depreciation is subject to recapture even though the rest of the home qualifies.
• 1031 exchange. Not available for a primary residence. Section 1031 applies to property held for investment or business use.

Does Florida tax the gain?

No. Florida has no state individual income tax, so there is no state capital gains tax on the sale of a home here. The entire question is federal.

If you are moving out of state, the state you establish residency in may treat the gain differently. That is worth raising with a CPA before you close, not after.

How is this reported?

If you receive a Form 1099-S from the closing agent, or if you have taxable gain above the exclusion, the sale is reported on Form 8949 and Schedule D. If the entire gain is excluded and no 1099-S was issued, reporting is generally not required.

Your closing agent may ask you to certify at closing whether the sale qualifies for the exclusion, which determines whether a 1099-S is issued at all.

Frequently asked questions