Section 121: No Purchase Deadline

The Section 121 exclusion works the same in Miami as it does everywhere else in the country. Sell your primary residence after living in it for at least two of the past five years, and you can exclude up to $250,000 in gain ($500,000 married filing jointly). You don’t have to buy another home. No 60-day rule. No one-year window. The old rollover requirement disappeared in 1997.

That said, Miami real estate has appreciated so aggressively over the past decade that plenty of sellers are blowing past the exclusion cap. A Coral Gables homeowner who bought for $450,000 in 2013 and sells for $1.4 million has a $950,000 gain. After the $500,000 exclusion, $450,000 is still taxable at the federal level.

The Florida Advantage: No State Capital Gains Tax

This is the headline. Florida has no state income tax, period. No capital gains tax. No additional surtax on high earners. When you sell a home in Miami, the only income tax you face is federal.

Compare that to selling the same home in New York (up to 10.9% state plus 3.876% city tax) or California (up to 13.3%). On a $450,000 taxable gain, a New York City seller pays roughly $66,000 in state and city tax that a Miami seller doesn’t owe. That difference alone explains a lot of the migration patterns we’ve seen from the Northeast to South Florida.

The federal bill on that $450,000 gain still runs about $107,000 (20% capital gains rate plus 3.8% NIIT for high earners), but that’s the whole picture. No state form to file, no state estimated payments to make.

Homestead Exemption: Where Timing Matters

Florida’s homestead exemption is one of the most valuable property tax benefits in the country. It knocks $50,000 off your assessed value and, more importantly, caps annual assessment increases at 3% through the Save Our Homes provision. After a decade of ownership, your assessed value can trail the market value by hundreds of thousands of dollars.

When you sell and buy a new home in Florida, you can port up to $500,000 of the difference between your assessed value and market value to the new property. This is separate from your income tax situation — it affects property taxes only. But you have to apply for the new homestead exemption by March 1 of the year following the purchase, and you need to establish the new home as your primary residence by January 1 of that year.

Miss those dates and you lose the portability. On a home where the Save Our Homes benefit was worth $300,000, that’s a property tax increase of roughly $6,000 per year, every year, for as long as you own the replacement home.

1031 Exchanges for Miami Investment Property

Miami’s rental market is strong enough that plenty of investors are doing 1031 exchanges on condos, duplexes, and small apartment buildings. The federal rules apply: 45 days to identify replacement properties, 180 days to close. No extensions, no exceptions.

Florida doesn’t impose a state-level tax on 1031 gains (because there’s no state income tax), which simplifies things. But watch out for the doc stamp tax: Florida charges $0.70 per $100 of consideration on deeds, and Miami-Dade County adds a $0.45 surtax. On a $2 million exchange property, that’s $23,000 in transfer costs at closing. Those aren’t deferred by the 1031 — they’re transaction taxes, not income taxes.

Foreign Sellers and FIRPTA in Miami

Miami’s international buyer and seller base makes this relevant in a way it isn’t in most cities. If a foreign person sells U.S. real property, the buyer must withhold 15% of the gross sale price under FIRPTA (Foreign Investment in Real Property Tax Act). On a $3 million condo in Brickell, that’s a $450,000 withholding at closing.

Reduced rates or exemptions exist — if the sale price is under $300,000 and the buyer plans to use it as a residence, the withholding drops to zero. Between $300,000 and $1 million with a buyer who will live in it, the rate drops to 10%. But these exceptions require planning before closing, not after. We see this come up constantly in Miami transactions where the seller assumed their attorney would handle it and found out at the closing table that it hadn’t been addressed.