People who own capital assets in Florida short-term—for less than a year—and sell them at a higher price won’t pay any Florida capital gains tax on the profit. However, they will need to pay capital gains tax to the Internal Revenue Service (IRS).

Because Florida doesn’t tax personal income, it also doesn’t tax income from capital gains. This is one of the many fiscal advantages available in the state of Florida and part of the reason why the Sunshine State is so appealing to savvy real estate investors.

What Is Short-Term Capital Gains Tax?

A capital gain is the profit you make on the sale of a capital asset. Profits made on the sale of these assets are subject to federal capital gains taxes. You only need to pay these taxes once when the asset is sold.

The amount you pay depends on your income and how long you’ve held the asset. If you’ve held it for a year or less, it will count as a short-term capital gain. Profits made on the sale of assets held for more than a year are considered long-term capital gains. This distinction is important when it comes to paying capital gains tax, as the tax rates are different for each.

Which Asset Sales Are Subject to Capital Gains Tax?

When paying federal capital gains tax, you only pay tax on the difference between the basis of the capital asset and the sale price of the asset. In other words, you only pay capital gains tax on the profit.

Apart from real estate, stocks, bonds, and other assets like art, antiques, and jewelry are subject to capital gains tax. Digital assets like cryptocurrency and NFTs also count as capital assets.

Is There a Florida Capital Gains Tax?

Florida doesn’t have a state income tax for individuals, so there also aren’t any Florida capital gains taxes. This applies both to permanent residents in Florida and people who live out of state but who own property in Florida. Though you won’t pay capital gains taxes in Florida, it is important to keep in mind that you will still pay federal capital gains taxes when you sell your property.

Florida Is Booming

Florida offers year-round warm weather and excellent financial incentives to invest. That’s why many people, including investors wishing to join the short-term rental market, are flocking to Florida. According to Redfin, house prices were up by 5.2% in December 2023 compared to the previous year. The median selling price was $404,200. This offers an interesting environment in which to both buy and sell real estate.

Consult a Florida-Based CPA

If you’ve invested in property before in other states, you may have paid state capital gains tax. A Florida CPA can help you understand the Florida-specific tax implications of selling assets in the Sunshine State and explain how the rules apply to U.S. income tax residents and foreign investors.

Federal Short-Term Capital Gains Tax Rates by Tax Bracket

Short-term capital gains are taxed the same as ordinary income. Tax brackets range from 10%-37% depending on your taxable income for that year. Your tax filing status will also affect how much you pay.

The 2024 tax brackets are the following:

Tax Rate For Single Filers For Married Individuals Filing Joint Returns For Heads of Households
10% $0 to $11,600 $0 to $23,200 $0 to $16,550
12% Over $11,600 to $47,150 Over $23,200 to $94,300 Over $16,550 to $63,100
22% Over $47,150 to $100,525 Over $94,300 to $201,050 Over $63,100 to $100,500
24% Over $100,525 to $191,950 Over $201,050 to $383,900 Over $100,500 to $191,950
32% Over $191,950 to $243,725 Over $383,900 to $487,450 Over $191,950 to $243,700
35% Over $243,725 to $609,350 Over $487,450 to $731,200 Over $243,700 to $609,350
37% Over $609,350 Over $731,200 Over $609,350


Short-Term vs Long-Term Capital Gains Taxes

Long-term capital gains are generally taxed more favorably than short-term capital gains. Long-term capital gains are taxed at 0%, 15%, or 20%, according to graduated income thresholds. In a few selected situations, the rate climbs as high as 25% or 28%.

The long-term capital gains tax brackets for 2023 and 2024 are:

Filing Status 0% 15% 20%
Single Up to $47,025 $47,025 to $518,900 Over $518,900
Head of household Up to $63,000 $63,000 to $551,350 Over $551,350
Married filing jointly and surviving spouse Up to $94,050 $95,050 to $583,750 Over $583,750
Married filing separately Up to $47,025 $47,025 to $291,850 Over $291,850

Source: (Same as above)

Why Sell Short-Term Capital Assets?

Seeing that the tax burden is higher when selling assets held for less than a year, you may wonder why people choose to sell their short-term capital assets. There are two main reasons why investors or individuals may choose to sell. These include:

  • Taking advantage of profitable or swing trades when the benefits outweigh the higher tax bill
  • The urgent need for capital

Your CPA can advise you on how to proceed when faced with either of these two situations or if you wish to sell a short-term capital asset for any other reason.

Remember Florida Property Taxes

Federal capital gains tax isn’t the only tax homeowners pay in Florida. You must also pay Florida property taxes on any real estate you own. The amount of Florida property tax you owe depends on the annual tax rate set by your local government and the assessed value of the property. Local governments use a millage rate to determine your tax bill, which is calculated by charging the stipulated rate for each $1,000 of your property’s assessed value. To work out the rough amount you may be liable to pay, follow this formula:

(Value of Your Property / 1,000) x Millage Rate = Property Tax Owed

Property appraisers assess the value of each home as of January 1 and send an annual Notice of Proposed Property Taxes in August. There are exemptions that lower the taxable value of properties (generally homesteads) for eligible homeowners.

Are All Properties Subject to Property Tax?

Primary residences aren’t the only properties that are subject to property taxes in Florida. If your business owns property, you own rental properties in Florida, or you inherited property in the Sunshine State, you must also pay annual taxes on those properties.

Buying Property from a Foreign Individual or Entity

Individuals purchasing property from foreign investors should be aware of a federal law that affects the tax they pay on real estate in Florida and anywhere else in the United States: the Foreign Investment in Real Property Tax Act (FIRPTA). FIRPTA withholding was originally brought into effect to recuperate lost capital gain taxes from the sales of U.S. real estate by foreign individuals or entities.

Compliance with FIRPTA can sometimes be complicated and, unfortunately, can delay sales. Therefore, it’s strongly recommended that foreign property owners also get professional help from U.S.-based CPAs who understand the ins and outs of the system.

How Much Tax Must Be Withheld According to the FIRPTA?

People who purchase U.S. real property interests from foreign investors or entities must withhold 15% of the amount realized on the disposition. This amount is 10% for dispositions before February 17, 2016.

The withholding agent is nearly always the buyer (the transferee). There are potentially heavy fines for not following the rules set out in the FIRPTA. Your CPA can explain the rules and factor in the FIRPTA during the property-purchase planning process, if applicable.

Reduce Your Tax Liability with a Florida CPA

Navigating the complexities of the tax system alone isn’t easy, especially as your portfolio expands. To thoroughly understand your options and avoid potential penalties for underpayment, it’s best to work with a Florida CPA when buying or selling real estate in Florida.

Property owners in Florida can benefit from the guidance of a tax professional to understand Florida real estate taxes, federal capital gains taxes, and anything else that may increase or reduce their tax liability. With all the appropriate documentation and expertise at hand, you could be looking at significant tax savings.

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