When you're thinking about selling real estate in Florida, you should consider your eligibility for the capital gains laws of 1997. The new law can save you a great deal of money in profit taxes. Rules apply to taking advantage of the law, though there are exceptions. Check with your accountant before taking action on selling your home.
Adjustments and Capital Gain
Find out what your capital gain is on your Florida home by subtracting the costs of buying the home, the costs of improving the home and the costs of selling it from the actual purchase price (or anticipated purchase price, if you're just considering selling the home). What's left is considered your "capital gain," or your profit.
As of 1997, you don't have to pay income taxes on the first $250,000 of capital gain, or profit, from selling your home in Florida. This amount increases to $500,000 if you're married. Any amount exceeding these numbers is taxed at 20 percent, which is down from the previous tax amount of 28 percent.
You must have used the home as your primary residence for two of the last five years, though those two years do not need to be consecutive. You also cannot have sold another home in the past two years. Moreover, in 2007 a new rule was introduced: Those whose spouse has died can still be exempt from taxes on up to $500,000 in capital gains for two years after the spouse passed away.
There are exceptions to the two-year residence rule. If an unforeseen circumstance has befallen your family, such as a medical crisis, divorce or loss of employment, you may be able to benefit fully or at least partially from the capital gains law, even if you didn't live a full two years in the home. People in the military or who work for foreign services are also eligible for special consideration if their career causes extended absences from the home that keep them from using the home as a permanent residence for two years. Consult your accountant to see if your circumstances qualify.
- Jupiterimages/Photos.com/Getty Images