How Much of Your Home Sale Profit Is Tax Free?
Most Florida sellers owe nothing, but the ones who do usually find out at tax time. Run your numbers through the Section 121 exclusion and see your estimated taxable gain before you price the house.
Your sale
Your estimate
The two-of-five-year rule, in plain English
Own the home and live in it as your main residence for at least 24 months out of the five years before closing, and the first $250,000 of gain ($500,000 married filing jointly) is simply not taxed. The months do not need to be consecutive, the exclusion can be used repeatedly (not more than once every two years), and Florida adds nothing on top since there is no state income tax. Where sellers get surprised: forgetting improvements when computing basis, rental years that drag depreciation recapture into the picture, and second homes, which get no exclusion at all.
Common questions
How much profit on a home sale is tax free?
If the home was your primary residence for at least 2 of the last 5 years, Section 121 excludes up to 250,000 dollars of gain for a single filer and 500,000 dollars for married filing jointly. Gain beyond that is taxed as long-term capital gain.
What counts toward my cost basis?
What you originally paid, plus most purchase closing costs, plus capital improvements: additions, a new roof, remodels, new HVAC. Repairs and maintenance do not count. Keep receipts; basis is where sellers most often overpay tax.
What federal rate applies to the taxable part?
Long-term capital gains rates of 0%, 15%, or 20% depending on your taxable income, and most sellers land at 15%. High earners may also owe the 3.8% net investment income tax. Short-term gains, on homes held under a year, are taxed as ordinary income.
Does Florida tax my home sale profit?
No. Florida has no state income tax, so there is no state capital gains tax on your sale. Sellers moving from states that do tax gains often time the sale and their move with that in mind.
What if I rented the home out for part of the time?
Depreciation you took or could have taken during rental years is recaptured at up to 25% and cannot be excluded under Section 121, and periods of nonqualified use can reduce the exclusion. That situation is worth a CPA conversation before you list.
Do I still qualify if I lived there less than 2 years?
A partial exclusion may apply if the early sale was due to a job move, health, or certain unforeseen circumstances, prorated by time. Otherwise the full gain is taxable.
Selling soon? Pair this with what you will actually walk away with by county and the cash-offer comparison. Buying your next Florida home: check your Save Our Homes portability.
<a href="https://movewithmomentum.com/tools/home-sale-capital-gains-calculator">Home Sale Capital Gains Calculator: Section 121 Exclusion (2026) — Momentum Realty</a>Estimates only, for a straightforward primary-residence sale. Does not model depreciation recapture, nonqualified use, partial exclusions, 1031 exchanges, or state taxes owed elsewhere. Federal long-term capital gains rates of 0/15/20% plus the 3.8% NIIT depend on your total taxable income for the year; brackets adjust annually. This is not tax advice; confirm with a CPA before acting. Equal Housing Opportunity.