Quick answer: Not to Florida, and to the IRS only on gain your exclusion does not cover: Florida has no personal income tax, and section 121 of the Internal Revenue Code lets you exclude up to $250,000 of gain on the sale of your home, or $500,000 on a joint return, if you owned it and lived in it as your principal residence for at least 2 of the 5 years before the sale. Long-term gain above the exclusion is taxed in 2026 at 0, 15 or 20 percent depending on taxable income, gain from depreciation at up to 25 percent, and the 3.8 percent net investment income tax can reach the taxable part, never the excluded part. Depreciation from renting the home, rental time after 2008 and a second excluded sale within 2 years reduce or block the exclusion. As of October 24, 2026, no 2025 or 2026 federal law I found changed section 121; the bills that would raise or remove the limits are proposals. Have a CPA or tax adviser run your numbers before you list.
If you bought your Port St. Lucie, Stuart or Vero Beach home years ago, you may be asking: do I pay capital gains tax when I sell my house in Florida? The answer is federal, and it turns on ownership and residence time, basis and selling costs.
Does Florida tax the gain when you sell your house?
No. Florida's income tax statute cites "the mandate in s. 5, Art. VII of the State Constitution that no income tax be levied upon natural persons who are residents and citizens of this state" (s. 220.02(1)). That holds in St. Lucie, Martin and Indian River counties alike. Florida does tax the deed, at 70 cents per $100 of the price (s. 201.02(1)(a)), which Publication 523 counts as a selling expense if you paid it. Filing in another state? Ask your CPA; I did not research other states.
How much gain can you exclude under section 121?
Section 121(a) excludes gain on a home you "owned and used" as your principal residence "for periods aggregating 2 years or more" during the 5 years ending on the sale date. The limit is $250,000 (121(b)(1)), or $500,000 on a joint return if either spouse meets the ownership test, both meet the use test, and neither is barred by the once-every-2-years rule (121(b)(2)(A)); otherwise the spouses' individual limits are added (121(b)(2)(B)). IRS Tax Topic 701, updated October 12, 2026, still states both figures.
Publication 523 (2025 edition, dated February 26, 2026, the latest I found) puts it in months: at least 24 months of ownership and 24 months, or 730 days, of residence in those 5 years, not necessarily continuous. "You may take the exclusion only once during a 2-year period" (121(b)(3)). A loss on your home is not deductible.
What if you have to sell before 2 years?
Section 121(c) prorates the limit when you miss those tests, but only if the sale is "by reason of a change in place of employment, health, or, to the extent provided in regulations, unforeseen circumstances." Publication 523 describes a new job "at least 50 miles farther from the home than your old work location," a move for the diagnosis or treatment of disease, illness or injury, and unforeseeable events such as a death, divorce or legal separation, multiple births from one pregnancy, unemployment compensation eligibility, or a change in employment status that leaves you unable to pay basic living expenses.
Hypothetically, a single seller who owned and lived in the home 12 months, then took a new job 60 miles farther from the home than the old job, has a limit of $250,000 x 12/24, or $125,000, so a $90,000 gain is fully excluded. If your reason is not plainly on that list, your CPA should test it.
Rental time, depreciation, a late spouse and military orders
Depreciation and rental time. Depreciation allowed or allowable after May 6, 1997 is not excludable (121(d)(6)); Publication 523 says it is recaptured and reported on Form 4797, and as unrecaptured section 1250 gain it is taxed at up to 25 percent (IRC 1(h)(1)(E)). Gain allocated to "nonqualified use" is not excluded (121(b)(5)). That is time on or after January 1, 2009 when the home was not the principal residence of you, your spouse or a former spouse. It does not include time after you last lived there within the 5-year window, up to 10 years of qualified official extended duty, or up to 2 years of temporary absence for work, health or unforeseen circumstances.
Depreciation comes off first. In a simplified hypothetical, a single seller bought January 1, 2016, rented the home 24 months ($10,000 of depreciation), lived there 96 months and sold January 1, 2026, with a $300,000 gain. The $10,000 is taxable. Of the other $290,000, 24/120, or $58,000, is nonqualified use and taxable. The remaining $232,000 fits under $250,000 and is excluded. Taxable gain: $68,000.
A surviving spouse. An unmarried surviving spouse can use the $500,000 limit for a sale no later than 2 years after the death if the joint tests were met immediately before it (121(b)(4)), and counts the late spouse's ownership and use (121(d)(2)). A death on March 1, 2026 means selling by March 1, 2028.
Military, Foreign Service and intelligence duty. On qualified official extended duty (a duty station at least 50 miles away, or government quarters under orders, for more than 90 days or indefinitely), you can elect to suspend the 5-year window for up to 10 years (121(d)(9)).
Your basis and your selling costs decide the gain
Publication 523's Worksheet 2 figures gain as the amount realized (sale price minus selling expenses) minus adjusted basis. Basis is your purchase price plus purchase costs, such as recording and survey fees, attorney fees for the title search, contract and deed, transfer or stamp taxes, and owner's title insurance (not loan charges or insurance premiums), plus improvements: work that adds value, prolongs the home's life or adapts it to new uses, like a new roof or central air. Repairs such as painting or fixing a leak generally do not count unless part of a larger remodel.
Selling expenses include commissions, advertising and legal fees, loan charges you paid that would normally be the buyer's, "any other fees or costs to sell your home," and deed stamps you paid. My breakdown of what it costs to sell a home in Florida walks through those lines.
What are the 2026 capital gains rates on the taxable part?
Rev. Proc. 2025-32 (section 4.03) sets the 2026 taxable income amounts where the 0 and 15 percent long-term rates end:
| Filing status | 0 percent up to | 15 percent up to |
|---|---|---|
| Married filing jointly or surviving spouse | $98,900 | $613,700 |
| Single | $49,450 | $545,500 |
| Head of household | $66,200 | $579,600 |
| Married filing separately | $49,450 | $306,850 |
Above the 15 percent amount the rate is 20 percent (IRC 1(h)(1)(D)). The amounts are measured against taxable income, including other income. The net investment income tax is 3.8 percent of the lesser of net investment income or modified AGI above $250,000 (joint return or surviving spouse), $125,000 (married filing separately) or $200,000 (others) (IRC 1411). The IRS says those thresholds are "not indexed for inflation" and that gain excluded under section 121 is excluded from net investment income.
A worked example: one sale, two filing statuses
Every number here is hypothetical: a home bought in 2014 for $200,000, lived in throughout and sold in 2026 for $600,000. The commission is an assumed figure, not a rate I am quoting.
| Line | Joint return | Single filer |
|---|---|---|
| Adjusted basis: $200,000 price + $2,000 purchase costs + $48,000 improvements | $250,000 | $250,000 |
| Selling expenses: $30,000 commission + $4,200 deed stamps ($600,000 / 100 x $0.70) + $1,800 other | $36,000 | $36,000 |
| Amount realized: $600,000 minus $36,000 | $564,000 | $564,000 |
| Gain: $564,000 minus $250,000 | $314,000 | $314,000 |
| Exclusion limit | $500,000 | $250,000 |
| Taxable gain | $0 | $64,000 |
If the single seller's taxable income puts all $64,000 between $49,450 and $545,500, the tax at 15 percent is $9,600. For the 3.8 percent tax, assume the $64,000 is the only investment income: at modified AGI of $250,000, it applies to the lesser of $64,000 or $50,000 ($250,000 minus $200,000), so $50,000 x 3.8 percent is $1,900. Under $200,000 of modified AGI, it is $0.
Form 1099-S and the certification at closing
The settlement agent named on your Closing Disclosure generally files Form 1099-S. It need not file for a principal residence sale of $250,000 or less ($500,000 if the certification states you are married) when each seller signs, under penalties of perjury, a certification that the home was the seller's principal residence under section 121, the full gain is excludable, and there was no nonqualified use after December 31, 2008 (Instructions for Form 1099-S, Rev. 12-2026). Both example sales exceed $500,000, so expect the form on either return. If you receive one, Publication 523 says to report the sale on Form 8949 even with no taxable gain; taxable gain goes on Form 8949 and Schedule D.
Did Congress change the home sale exclusion in 2025 or 2026?
As of October 24, 2026, no 2025 or 2026 federal law my research found changed section 121. Cornell's copy lists no amendment after 2017. The IRS page on individual provisions of the One Big Beautiful Bill (which Rev. Proc. 2025-32 identifies as Public Law 119-21, July 4, 2025), updated August 27, 2026, lists nothing on home sales, and Publication 523 lists no section 121 change. Govinfo's record of the 21st Century ROAD to Housing Act (Public Law 119-101, July 11, 2026) lists Title 26 among its U.S. Code citations, but the Bipartisan Policy Center's summary lists no tax provisions, and no source I reviewed shows a section 121 change (I did not read the full law).
The bills to change it are proposals. H.R. 1340 (February 13, 2025) and S. 3332 (December 3, 2025), the More Homes on the Market Act, would raise the limits to $500,000 and $1,000,000, indexed. H.R. 4327, the No Tax on Home Sales Act (July 10, 2025), would "eliminate the dollar limitations." H.R. 7131 (January 16, 2026) would strike paragraphs (b)(1), (b)(2) and (b)(4). H.R. 9064 (May 29, 2026) would temporarily increase the exclusion for qualifying seniors. H.R. 1340 and H.R. 9064 showed only referral to committee; I did not check the others past introduction. Ask your CPA before any of them affects your timing.
What I could not confirm, and what to bring your CPA
I read section 121 on Cornell's site, which shows no currency date, because the official U.S. Code page would not load on October 24, 2026. I did not pull the Treasury regulation's safe harbors for partial exclusions, and I did not verify who pays deed stamps under the standard Florida contract, so read yours.
A CPA or tax adviser should run your numbers before you list, not after you close. Bring your purchase closing statement, improvement invoices, any depreciation records, the dates you lived elsewhere and an estimate of this year's other income. For a rental or investment property rather than your home, my guide to exchanging Treasure Coast investment property covers a different route.
Check the 2-year and 5-year clocks and estimate your gain before the listing goes live.
More for Treasure Coast sellers: my guides on why a Port St. Lucie house is not selling, what Florida sellers must disclose, selling a home with an old roof, homestead portability, selling an inherited home and whether to sell first or buy first.
Questions sellers ask about capital gains on a Florida home sale
Do I pay capital gains tax when I sell my house in Florida?
Not to Florida, which levies no income tax on resident individuals. Federally, you owe tax only on gain the section 121 exclusion does not cover; the exclusion is up to $250,000, or $500,000 on a joint return, if you owned and lived in the home at least 2 of the 5 years before the sale.
Do the 2 years have to be consecutive?
No. Section 121 counts periods aggregating 2 years or more within the 5 years before the sale, and Publication 523 describes at least 24 months, or 730 days, of residence.
What if I have to sell before I have lived there 2 years?
If the sale is because of a new job at least 50 miles farther from the home than your old work location, health, or an unforeseeable event on the IRS list, the limit is prorated. Twelve months of qualifying time gives a single filer $250,000 x 12/24, or $125,000.
Will I get a Form 1099-S?
Yes, unless the sale is $250,000 or less ($500,000 if married) and each seller signs the certification that the home was a principal residence, the full gain is excludable and there was no nonqualified use after December 31, 2008. Publication 523 says that if you receive one, you must report the sale on Form 8949 even with no taxable gain.
What capital gains rate applies in 2026?
Long-term gain is taxed at 0, 15 or 20 percent depending on taxable income, under Rev. Proc. 2025-32, and gain from depreciation at up to 25 percent (IRC 1(h)(1)(E)). The 15 percent rate runs to $545,500 of taxable income for a single filer and $613,700 on a joint return. The 3.8 percent net investment income tax can apply to the taxable part, not the excluded part.
Did Congress raise the home sale exclusion?
Not as of October 24, 2026, in any source I reviewed. Bills such as the More Homes on the Market Act and the No Tax on Home Sales Act were introduced, but they are proposals, not law.
Talk with William. Before you list, send me the address and the closing statement from when you bought (a photo by text works). I will build an estimated seller net sheet with current selling costs, so you and your CPA can see the gain math before the house goes on the market. Call or text (772) 800-2274 or send a message.
General information, not legal, tax, lending or insurance advice, and not a guarantee of any sale, price or timeline. Section 121 was read on Cornell's site because the official U.S. Code page would not load, Publication 523 is the 2025 edition, the 2026 rate amounts are from Rev. Proc. 2025-32, the status of the bills described was not fully checked, and the 2026 housing law was reviewed through its govinfo record and a summary, not its full text; have a CPA or tax adviser confirm the exclusion, basis and tax for your own sale before you list. Statute, rule and market references are as reviewed on October 24, 2026. William Merchant, REALTOR®, RE/MAX Gold. Each RE/MAX office is independently owned and operated. Equal Housing Opportunity.
Sources
- 26 U.S.C. 121, Exclusion of gain from sale of principal residence (Cornell LII, no currency date shown, reviewed October 24, 2026)
- IRS Publication 523 (2025), Selling Your Home, for use in preparing 2025 returns (February 26, 2026)
- IRS Tax Topic 701 (page last reviewed or updated October 12, 2026)
- IRS Instructions for Form 1099-S (Rev. 12-2026)
- IRS Rev. Proc. 2025-32, inflation adjustments for taxable years beginning in 2026, section 4.03 (identifies Public Law 119-21, July 4, 2025)
- 26 U.S.C. 1, Tax imposed, including 1(h) capital gains rates (Cornell LII)
- 26 U.S.C. 1411, Imposition of net investment income tax (Cornell LII)
- IRS: Questions and answers on the net investment income tax (updated September 14, 2026)
- IRS: One Big Beautiful Bill provisions, individuals and workers (updated August 27, 2026)
- Florida Statutes 220.02 (2025)
- Florida Statutes 201.02, Documentary stamp tax on deeds (2025)
- H.R. 1340, More Homes on the Market Act, introduced February 13, 2025 (govinfo)
- S. 3332, More Homes on the Market Act, introduced December 3, 2025 (govinfo)
- H.R. 4327, No Tax on Home Sales Act, introduced July 10, 2025
- H.R. 7131, Middle Class Home Tax Elimination Act, introduced January 16, 2026
- H.R. 9064, introduced May 29, 2026 (govinfo)
- govinfo: Public Law 119-101, 21st Century ROAD to Housing Act (H.R. 6644, approved July 11, 2026), record listing its U.S. Code citations
- Bipartisan Policy Center: Inside the deal, what is in the final 21st Century ROAD to Housing Act (summary of the law that became law July 11, 2026; secondary)
