If you’re selling your home, don’t forget about taxes
Florida continues to attract new residents year-round, making it a strong and steady market for sellers. While National Association of Realtors (NAR) data shows existing-home sales slowed in Q3 2025, prices continued to rise. In fact, the median home price reached $426,800, up 4.9% from 2023. If you’re preparing to sell, now is an ideal time to understand how market trends, tax rules, and the home sale exclusion may affect your results. First Coast Tax Advisor can help you plan ahead with clarity and confidence. https://www.nar.realtor/newsroom/nar-pending-home-sales-report-shows-3-3-increase-in-november If you’re planning to sell your home this year, reviewing the tax considerations early can help you avoid surprises related to the home sale exclusion and keep more of your gain. Understanding the Home Sale Exclusion ($250,000 / $500,000 Rule) If you’re selling your principal residence, you may be able to exclude up to $250,000 of gain ($500,000 for married couples filing jointly) under the law known as the home sale exclusion. When the gain qualifies for the exclusion, it’s also removed from the 3.8% Net Investment Income Tax calculation—an added benefit many homeowners overlook. Therefore, understanding whether you qualify is essential before you sell. To use the exclusion, you must meet the IRS’s primary requirements: 1. Ownership Test You must have owned the home for at least two years during the five-year period ending on the date of sale, in order to benefit from the home sale exclusion. 2. Use Test Additional Limitation You must have lived in the home as your principal residence for at least two years during the same five-year period. The periods of ownership and use do not have to overlap to be eligible for this exclusion from home sale gains. You can only use the exclusion related to a home sale once every two years. These rules are straightforward on the surface. However, applying the home sale exclusion to real-life scenarios—moves, job changes, mixed-use homes, or partial rental use—can get complicated. First Coast Tax Advisor can help you confirm your eligibility and estimate your tax exposure. That way, you can move forward with clarity and confidence. https://www.irs.gov/taxtopics/tc701 When Your Home Sale Gain Exceeds the $250,000 / $500,000 Exclusion If your profit exceeds the home sale exclusion amount of $250,000 / $500,000 (based on filing status), the amount above those limits is generally taxable. When you’ve owned the property for more than a year, this excess gain is taxed at long-term capital gains rates. However, if you owned the home for less than a year, the IRS treats the gain as short-term—taxed at your ordinary income rate. This rate can be more than double the long-term rate. Therefore, understanding where you fall is essential before you sell. First Coast Tax Advisor can help you calculate your true tax exposure and explore strategies to reduce it. Beyond the exclusion itself, here are two key tax considerations when selling a home: 1. Maintain a clear and accurate basis. Keeping detailed records of your basis is crucial for reporting the correct gain, especially when dealing with the home sale exclusion. This includes your original purchase price, closing costs, and any capital improvements—reduced by casualty losses or depreciation if part of the home was used for business or rental purposes. Furthermore, strong documentation can make a meaningful difference when calculating your taxable gain. 2. Know when a loss is (and isn’t) deductible. A loss on the sale of your primary residence generally isn’t deductible. However, if part of your home was rented out or used exclusively for business, a loss related to that portion may be deductible. Understanding how your home was used can help you identify opportunities you may otherwise overlook—including strategies that may interact with the home sale exclusion. Selling your home is one of the most significant financial transactions you’ll make. Clear guidance on tax rules and the home sale exclusion can help you move forward with confidence—and keep more of what you’ve built. A second home, like a beach house, doesn’t qualify for the exclusion for a home sale. But if it was used as a rental, you may be able to treat it as a business asset—potentially deferring tax through an installment sale or a 1031 exchange or even deducting a loss. First Coast Tax Advisor helps you evaluate the best strategy before you sell. Your home is one of your most valuable assets. Before you sell, make sure you understand the tax impact, including the rules for the home sale exclusion. First Coast Tax Advisor helps you plan ahead, maximize your exclusion, and answer every question—so you can move forward with clarity and confidence.