By Scott Morreau | May 28, 2026

Here's what I hear all the time from sellers preparing to list in Fort Lauderdale:

"We've been here 15 years. The house has gone up a lot. Are we going to get hit with a huge tax bill?"

It's one of the most important questions to answer before you list — not after. And the answer is usually better than people expect, but not always simple.

Let's walk through exactly how this works, what the real numbers look like in Broward County's market, and where things get complicated.

The Good News: Florida Has No State Capital Gains Tax

Let's start with the part everyone misses. Florida doesn't tax capital gains. There's no state income tax here at all — which means when you sell your home, the state of Florida takes nothing from your profit. That's a meaningful advantage over sellers in states like California (which taxes capital gains at up to 13.3%), New York, or Massachusetts.

The only capital gains exposure for Fort Lauderdale home sellers is federal.

Who Qualifies for the Federal Exclusion

The IRS Section 121 exclusion lets you exclude a substantial portion of your home sale gain from federal taxes. The rules:

• $250,000 exclusion for single filers
• $500,000 exclusion for married couples filing jointly
• You must have owned the home for at least 2 years out of the last 5
• You must have lived in it as your primary residence for at least 2 of the last 5 years
• The ownership and residency periods don't have to be concurrent — they just both need to fall within that 5-year window
• You cannot have used this exclusion on another home sale within the past 2 years

For most Fort Lauderdale homeowners who've been in their primary residence for several years, this exclusion eliminates the federal tax bill entirely.

Here's a simple example at the lower end of Scott's market: You and your spouse bought a home in Victoria Park for $550,000 in 2016. You've lived there since. You sell today for $900,000. Your gain is $350,000. The $500,000 exclusion completely covers it. You owe nothing to the IRS.

Where It Gets Complicated: Long-Term Owners and Luxury Properties

The $500,000 cap matters a lot more in Broward County's current market than it did five or ten years ago.

Consider this scenario: A couple bought a waterfront home on Las Olas Isles in 2008 for $650,000. It's now worth $1.6 million. Their gain is $950,000. After the $500,000 exclusion, they have $450,000 of taxable gain. At the federal long-term capital gains rate — typically 15–20% depending on income — that's a federal tax bill between $67,500 and $90,000.

That's not a planning failure. That's a real outcome that surprises sellers who assumed the exclusion covered everything.

This is exactly the conversation I have with clients before we discuss list price. Your taxable gain affects your net, and your net affects your next move.

What Federal Long-Term Capital Gains Rates Look Like

If your gain exceeds the exclusion, the taxable portion is subject to federal long-term capital gains rates (assuming you've owned the home more than a year, which is almost always the case):

• 0% — for lower-income households (roughly under $94,000 in 2026 for married filers)
• 15% — for most middle and upper-middle income households (up to roughly $583,750 for married filers)
• 20% — for the highest earners

There's also the Net Investment Income Tax (NIIT) — an additional 3.8% federal tax that kicks in for high earners (above $250,000 single, $200,000 married filing separately, or $200,000 base with phase-outs) on investment income including real estate gains above the exclusion. So for some Fort Lauderdale luxury sellers, the effective marginal federal rate on excess gain could reach 23.8%.

None of this is state tax. It's all federal. Florida still takes nothing.

How to Calculate Your Capital Gain

Your capital gain is not simply the difference between your sale price and your original purchase price. The IRS definition of "gain" is:

Sale price − adjusted cost basis = capital gain

Your adjusted cost basis includes:

• Original purchase price
• Closing costs you paid when you bought
• Capital improvements you made (additions, a new roof, kitchen renovation, pool addition, impact windows)
• Points you paid on the original mortgage

What doesn't count: repairs and maintenance. Repainting, fixing a leak, replacing a water heater — these are expenses, not basis additions. But replacing the entire HVAC system, adding a bathroom, or installing impact-rated windows? Those increase your basis and reduce your taxable gain.

If you've been in your Fort Lauderdale home for 10–20 years, there's a good chance you've added significant improvements that you haven't tracked carefully. That's worth piecing back together with your CPA before you close — it can move your taxable gain by $30,000, $50,000, or more.

Investment Properties and Second Homes: Different Rules Apply

Everything above applies to your primary residence. If you're selling a rental property, investment property, or vacation home you don't use as a primary residence, the exclusion doesn't apply. Your entire gain is taxable — and you also face depreciation recapture, which taxes the depreciation deductions you took (or should have taken) over the years at up to 25%.

For investment property sellers, the most powerful planning tool is often the 1031 exchange — which allows you to defer capital gains by rolling proceeds into a like-kind replacement property within specific time windows (45 days to identify a replacement property, 180 days to close). This is a complex strategy that requires a qualified intermediary and a tax advisor, but it's one I help clients think through as part of the pre-listing conversation.

I've worked with a number of Broward County investors who've used 1031 exchanges to defer significant six-figure gains while repositioning into stronger properties. The timing is strict, so the planning has to start before the listing goes live. You can read more about how net proceeds work on a standard home sale in my earlier post on how much you'll net selling your Fort Lauderdale home.

Timing Matters: The 2-Year Residency Rule and Partial Exclusions

You don't have to have lived there exactly two consecutive years. The 2-year use test is measured by aggregate time within the 5-year window. Even if you moved out for a period, you might still qualify if you total at least 24 months of residency across the lookback window.

If you fall short of the full 2-year residency test — maybe you need to move for a job, a health situation, or an unforeseen life change — you may still qualify for a partial exclusion. The IRS allows a prorated exclusion based on how many months you lived there relative to 24. It's not nothing.

This is a fact-specific calculation, and your CPA needs to run the actual numbers. But the point is: don't assume you get zero just because you haven't hit the full two years.

The Practical Planning Conversation

Here's what I tell every client who raises this question:

The conversation with your CPA needs to happen before your listing goes live, not after you've accepted an offer. Once you're under contract, you're reacting. If you plan ahead, you might have options — adjusting timing to hit the 2-year mark, tracking down basis improvements to reduce taxable gain, or structuring the transaction in a way that works better for your situation.

For most Fort Lauderdale sellers in the $750K–$1.5M range who've owned for several years, the exclusion covers the full gain and there's no federal tax at all. For longer-term owners of higher-value homes — especially in waterfront neighborhoods like Harbor Beach, Rio Vista, and Las Olas Isles — the gain may exceed the exclusion, and the planning matters.

Either way, knowing your number before you list puts you in a much better position to make decisions about pricing, timing, and what to do next.