Is Washington Finally Fixing the Outdated Home Equity Tax? What It Means for Florida Buyers and Sellers
For decades, homeowners have watched their property values rise especially in booming states like Florida only to find themselves boxed in by an outdated federal tax system that hasn’t kept up with inflation or modern market realities.
Now, Washington is finally paying attention.
With bipartisan discussions gaining traction, lawmakers are eyeing a possible increase to the home sale exclusion thresholds, currently $250,000 for individuals and $500,000 for married couples—numbers that haven’t budged since 1997. In today’s market, those caps are far too low, especially in luxury hubs like Miami, Palm Beach, and Naples.
Here’s how this potential shift could impact real estate buyers and sellers—and why it matters now more than ever.
1. Why is the current home equity tax outdated?
When the Taxpayer Relief Act was passed in 1997, a $500,000 gain on the sale of a primary residence seemed generous. Today, it barely covers appreciation in cities like Miami or New York. Sellers who bought 20 years ago are now facing six- and seven-figure tax hits, even when selling modest homes.
2. What’s changing in Washington?
Legislators are exploring an increase to the capital gains exclusion for homeowners, possibly tying it to inflation or regional pricing. There’s also talk of revising the two-out-of-five-year rule and making exceptions for aging homeowners, military families, and those relocating for health or economic reasons.
Nothing is finalized yet, but serious momentum is building.
3. How does this affect Florida sellers now?
If you’ve owned your home for several years, chances are you’re sitting on significant equity. For high-net-worth sellers in Florida, especially those from out of state or with second homes, this tax burden can drastically reduce net profits at closing.
A change in the law could mean keeping hundreds of thousands in gains—money that would otherwise be taxed under current capital gains rules.
4. Should I delay selling my Florida property?
It depends. If you’re close to the $500,000 exemption limit and not in a rush, it might make sense to wait and watch the legislation unfold. But timing the market is tricky—and taxes are only one piece of the puzzle. At Salcines Law, we advise clients holistically, balancing market conditions, legal factors, and personal goals.
5. How can I protect more of my gains?
There are several strategies to consider—some before you even list your home:
- Adjusting title ownership for marital or estate planning purposes
- Deferring capital gains through a 1031 exchange (for investment properties)
- Structuring sales to reduce net gain (through closing credits or capital improvements)
- Exploring trusts or LLCs to reposition assets strategically
6. Do foreign sellers face additional taxes?
Yes. Under FIRPTA, foreign sellers are subject to a withholding tax of up to 15% of the sales price, regardless of gain. Washington’s reforms may not directly affect this group, but international sellers should still consult legal and tax advisors to avoid unnecessary losses.
At Salcines Law, we do more than just close deals. We protect what you’ve earned.
With 26 years of experience in Florida real estate law and a background in accounting, we help clients minimize tax exposure, navigate legislative changes, and close with confidence.
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