Capital Gains Tax on a Property Sale in Miami — The Florida Advantage (and the Catches)
No State Income Tax on Capital Gains — What That Actually Saves You
In New York, you’d pay up to 10.9% state tax (plus city tax) on a capital gain. In California, up to 13.3%. In Florida, the state rate is zero. That’s not a gimmick or a deduction — there’s simply no state income tax of any kind. For someone selling a $2 million investment property with a $700,000 gain, skipping the state layer saves roughly $60,000 to $90,000 compared to those two states.
This is a big reason why real estate investors and retirees relocate to Florida before selling appreciated assets. The savings are immediate and significant. But you need to be a genuine Florida resident — the IRS and other state tax authorities look closely at domicile claims, especially when large gains are involved.
Federal Capital Gains Still Apply
Florida’s zero state tax doesn’t touch the federal side. Long-term capital gains (property held over a year) are taxed at 0%, 15%, or 20% depending on your income. Most Miami property sellers with meaningful gains fall into the 15% or 20% bracket. Short-term gains on property held less than a year get taxed at ordinary income rates up to 37%.
The mechanics are the same everywhere: sale price minus adjusted basis (original cost + improvements – depreciation) equals your gain. The difference in Miami is just that one fewer government takes a cut.
The $250K/$500K Primary Residence Exclusion
If the property was your primary residence for at least two of the last five years, you can exclude up to $250,000 of gain ($500,000 married filing jointly) under IRC §121. In Miami’s current market, where homes in neighborhoods like Coral Gables and Coconut Grove have appreciated sharply since 2020, this exclusion matters more than ever.
A couple who bought a house in Brickell for $550,000 in 2018 and sells for $1.1 million in 2025 has a roughly $550,000 gain. The $500,000 exclusion wipes out most of it, leaving only $50,000 subject to federal tax. Without the exclusion, the federal bill alone would be $82,500 or more.
Documentary Stamp Tax — Florida’s Transfer Tax
Florida doesn’t have an income tax, but it does charge documentary stamp tax on property transfers. The rate is $0.70 per $100 of the sale price statewide, except in Miami-Dade County, where the rate is $0.60 per $100 (plus a $0.45 surtax per $100 on documents that transfer property with consideration).
On a $1.5 million sale in Miami-Dade, the doc stamps run about $15,750. The seller typically pays this at closing. It’s based on the sale price, not the gain, so you owe it even if you sell at a loss.
Net Investment Income Tax — 3.8% on Top
High-income sellers owe the net investment income tax: an extra 3.8% on capital gains when modified adjusted gross income exceeds $200,000 (single) or $250,000 (married filing jointly), per IRC §1411. These thresholds haven’t been adjusted for inflation since 2013, so more sellers hit them every year. On a $700,000 gain, the NIIT adds $26,600.
FIRPTA — If You’re a Foreign Seller
Miami’s international buyer market means FIRPTA (the Foreign Investment in Real Property Tax Act) comes up frequently. If the seller is a foreign person, the buyer must withhold 15% of the gross sale price and send it to the IRS. The actual tax owed may be less, and the seller can file a return to claim a refund of the overpayment, but the withholding happens at closing regardless.
On a $3 million condo sale by a non-resident foreign seller, that’s a $450,000 withholding at closing. It’s refundable to the extent it exceeds the actual tax, but the cash is tied up until the return is processed.
Quick Estimate: Selling a $2M Rental in Miami
You bought a rental condo in Brickell for $1.1 million and sell it for $2 million after seven years. After $180,000 in depreciation and $60,000 in improvements, your adjusted basis is $980,000. The gain is $1,020,000.
- Federal long-term capital gains (20%): $204,000
- Net investment income tax (3.8%): $38,760
- Depreciation recapture (25% federal on $180K): $45,000
- Florida state income tax: $0
- Miami-Dade doc stamps (~$1.05/$100): $21,000
Total estimated taxes: roughly $308,760. Compare that to a similar sale in New York (~$328,000+) or Los Angeles (~$500,000+). The Florida advantage is real — it’s just not as large as the “no state tax” headline makes it sound, because federal taxes do most of the heavy lifting.
Key Takeaway
Miami sellers benefit from Florida’s zero state income tax, but federal capital gains, the NIIT, depreciation recapture, and documentary stamp taxes still add up. The total tax on a profitable property sale in Miami typically runs 25%–30% of the gain — lower than New York or LA, but not negligible. Explore 1031 exchange and timing strategies before listing.
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Frequently Asked Questions
Do I owe any Florida state tax on a property sale gain?
No. Florida has no individual income tax, so there’s no state-level tax on capital gains from a property sale. You still owe federal capital gains tax and may owe the 3.8% net investment income tax.
What are documentary stamp taxes in Miami-Dade?
Documentary stamps in Miami-Dade County run $0.60 per $100 of the sale price, plus a $0.45 surtax per $100. On a $1 million sale, that’s about $10,500. The seller typically pays this at closing.
Can I avoid capital gains tax by moving to Florida before selling?
Establishing Florida residency before selling property in another state can help you avoid that state’s income tax on the gain — but you must genuinely change your domicile. The former state may audit your claim, looking at where you vote, have your driver’s license, spend the majority of your time, and keep your primary home.
What is FIRPTA and does it apply to me?
FIRPTA applies to foreign persons (non-U.S. tax residents) selling U.S. real estate. The buyer withholds 15% of the gross sale price and remits it to the IRS. U.S. citizens and residents are not subject to FIRPTA withholding, even if they live abroad.
Is a 1031 exchange available in Florida?
Yes. You can defer federal capital gains tax by exchanging one investment property for another of equal or greater value. The replacement property must be identified within 45 days and closed within 180 days. Since Florida has no state income tax, there’s no state-level deferral to worry about.
Selling Property in Miami?
Our CPA team works with property owners nationwide. We can run the numbers on your specific situation before you list.