What You Need to Know When Selling Your Primary Residence in Florida
by Andrew Pardun on April 22nd, 2019 in Real Estate Law
Last modified on June 29th, 2019 at 8:34 pm
Are you considering selling your primary residence in Florida? If so, there are a few things you must consider that could save you a bundle on your real estate and capital gains taxes.
The first thing to consider is capital gains. The Tax Cuts and Jobs Act excludes up to $250,000.00 for single taxpayers and $500,000.00 for married taxpayers (“Threshold”) on realized capital gains on the sale of the taxpayer’s principal residence. To calculate capital gains, you take the price paid for the residence plus the cost of any improvements (“Basis”) and you deduct the Basis from the sales price giving you the capital gain (“Capital Gain”). Capital Gains are then multiplied by the applicable capital gains tax rate to arrive at taxes due. Therefore, it is important to keep good records of all improvements made to your home throughout the years as improvements will increase your Basis and decrease your Capital Gain. If your Capital Gain exceeds the Threshold you may want to consider a 1031 or “like-kind” exchange which will allow you to defer your tax liability to a later date.
Some more important considerations to keep in mind in Florida are the Homestead Exemption, Save Our Homes Cap, and Portability. Florida Residents are permitted to claim a Homestead Exemption on their primary residence which, among other things, lowers the amount of property tax they pay annually. Along with the Homestead Exemption comes the Save Our Homes Cap which limits increases in the assessed value of a primary residence to the lesser of 3% or the Consumer Price Index (CPI). When a Florida Resident sells their primary residence they have the ability to transfer their Homestead Exemption/Save our Homes Cap to their new residence and lock in the benefits previously enjoyed by the prior residence (this is known as “Portability”). Portability can equate to large savings in annual property tax and will most likely save you a ton of money in the long term.