Property owners, buyers, and sellers all need to understand their state’s real estate tax system. Property taxes can be difficult to understand, but we’re here to help. Here’s your guide to Florida real estate taxes.
Whether you’re buying, selling, or already own property, you need to understand your state’s real estate tax system.
Property taxes can vary widely based on what state, county, and city you live in. When you start thinking about buying or selling real estate, you also need to start thinking about state and local property taxes.
Learn the ins and outs of Florida property taxes today to be sure you’re paying the right amount.
Will You Have to Pay Taxes When You Sell Your Home in Florida?
Whether or not you’ll have to pay taxes on property you’re selling in Florida will depend on a few things. If you’re selling investment property or haven’t owned your home for at least two years, you can expect to pay taxes on your gains. But if you’re selling your primary residence and have lived there for at least two years, you may be exempt from federal capital gains taxes — if you meet the right criteria. Luckily, most home sellers do.
Federal Taxes
Most people selling their primary residence are exempt from paying federal taxes on the profits they make from selling their homes. Whether you have to pay taxes when selling your home depends on your gain and how long you’ve lived there, among a few other things.
The amount considered a profit or gain is the amount you paid for the house plus the amount of any improvements and renovations, minus the amount you’re selling the property for.
If you meet these qualifications, you will not have to pay federal taxes on your gains:
- You owned the house for at least two years;
- You resided in the house as your main residence for at least two years;
- In the two-year period after you bought your home, you didn’t exclude the profits from the sale of another home; and
- You’re profiting less than $250,000 (if single) or $500,000 (if married and filing jointly) from the sale.
If you don’t meet all of these qualifications, you’ll likely have to pay capital gains taxes on your property sale. However, you may qualify for an "unforeseen circumstances" exemption if you recently lost your job, went through a divorce, or had a family medical emergency.
There are two types of capital gains taxes, short-term and long-term. Which tax applies to you and what your rate is will depend on how long you’ve owned the property.
If you sell property within a year of buying, you’ll be charged for a short-term capital gain. This tax rate is the same as your income tax rate at the time of the sale.
If you sell property more than two years after buying, you’ll be charged for a long-term capital gain. The tax rate for long-term capital gains is significantly lower than the rate for short-term gains and will depend on the specifics of your sale.
Learn More: How to Avoid Capital Gains Tax When Selling a House
State Taxes
Florida follows the federal tax on capital gains in real estate, so if you’re exempt from federal taxes on your home sale, you’ll also be exempt from state taxes.
Real estate taxes can be complicated when you’re selling property. Be sure to talk to your real estate agent about your potential tax liability.
How Much Are Real Estate Transfer Taxes in Florida (and Who Pays Them)?
When real estate changes hands, oftentimes state and local governments charge a transfer tax. The transfer tax is a set percentage of either the sale price or the appraised value of the real estate. Real estate transfer taxes can be charged at the state, city, and/or county levels, depending on where you live.
Transfer Tax in Florida
Florida’s transfer tax falls under the Florida Documentary Stamp Tax. The documentary stamp tax applies to almost any transfer of an interest in property.
In every Florida county except Miami-Dade, the documentary stamp tax is 0.007% of your home’s assessed value. In Miami-Dade County, the tax rate is 0.006% of the assessed value of a single family residence and another 0.0045% surtax for other types of property.
How to Calculate Property Taxes in Florida
Every real estate buyer needs to understand their potential tax liability before they get too far along in the process. After your mortgage, your property tax bill will probably be one of your biggest regular expenses.
Property tax is a major source of revenue for state and local governments. State and local governments use property taxes to pay for things like public schools, parks, fire departments, and infrastructure. The rate at which property taxes are levied can vary greatly based on what state you live in and where you are located within the state.
Florida property taxes are slightly lower than the U.S. average. The average effective property tax rate in Florida is 1.02%, though the exact rate varies depending on which city and county you live in.
In addition to state tax, counties and many cities also have property tax. The median home value in Florida is $233,700. The owner of a $233,700 house would pay $2,991 (1.280%) in Miami-Dade County, versus $1,599 (0.684%) in Dixie County.
Tax Breaks for Florida Home Buyers & Sellers
There are state and federal programs that offer tax breaks to real estate owners, buyers, and sellers. Which program(s) you qualify for will depend on your personal situation.
Tax Breaks and Credits for Buyers
There are a number of programs that provide tax breaks and credits for buyers, especially first-time home buyers.
Florida’s Housing Mortgage Credit Certificate (MCC) Program helps first-time buyers save money every year they live in their home. The MCC program allows homeowners to claim between 10% and 50% of their mortgage interest each year as a federal tax credit.
Tax Breaks and Write-Offs for Sellers
Property sellers get tax breaks, too. One of the most common deductions for home sellers is for repairs and improvements related to selling their homes. This deduction allows sellers to deduct the costs of most repairs and improvements made within 90 days of their sale date.
Sellers can also deduct their mortgage interest for the time they own the property, discount points from their mortgage, property taxes up to $10,000, and costs related to selling their home.
Next Steps
Your tax liability can vary greatly from place to place, even within a state. Real estate buyers, sellers, and owners alike should be sure to seek guidance from a certified tax professional (accountant and/or attorney) in order to minimize your exposure and maximize your savings. You can also seek help from an expert real estate agent for tax questions or a referral to a tax expert.