What You'll Owe in Taxes When You Sell Your Beach House

By Harrison Lilly Emerald Coast | August 19, 2026

Here's what you're walking into.

The tax break you're thinking of doesn't apply here

Almost everyone who sits down with us has heard about the big exclusion. Sell your house, keep up to $250,000 of the profit tax-free if you're single, $500,000 if you're married. It's real, and if you've sold a primary residence before, you've probably used it.

It only works on the home you actually live in. A beach house, a vacation place, a rental — none of them qualify. The profit is taxable, all of it.

Here's what that looks like in practice. Say you bought on 30A for $900,000 and you're selling at $1.8 million. That's roughly $900,000 of profit, and there's no exclusion shielding any of it.

Florida not having a state income tax genuinely helps — you're not paying twice. But the federal bill is the federal bill, and it's bigger than most people expect.

What you'll actually owe

There are three separate pieces, and they stack.

Piece one: the capital gains rate itself. If you've owned the place more than a year, here's 2026:

One thing that catches people: the profit from the sale counts as income for that year. So a seller whose normal income sits comfortably in the 15% band can get pushed into 20% by the sale itself. The year you sell is not a normal tax year.

Piece two: an extra 3.8%. There's an additional tax that kicks in once your income for the year clears $200,000 single or $250,000 married. It's a flat 3.8% — it doesn't scale, it just applies. And because the profit from your sale counts toward that income figure, a big second-home sale usually triggers it whether or not you'd normally be anywhere near those thresholds.

Piece three: if you ever rented it, the depreciation comes back. This is the one that blindsides people, so it gets its own section.

The one that surprises rental owners

When you rent out a property, the IRS lets you write off a portion of the building's value every year. It's called depreciation, and it feels great — it shrinks your taxable rental income year after year.

When you sell, you pay it back. Every dollar you depreciated gets added back and taxed at up to 25%.

Read that rate again, because it's higher than what most people pay on the appreciation itself. You could owe 15% on the increase in your home's value and 25% on the depreciation you claimed while renting it.

And here's the part that really stings: you owe it whether or not you actually took the deduction.The rule covers depreciation "allowed or allowable." If your accountant should have claimed it and didn't, the IRS still treats it as claimed when you sell.

If you've been renting an Emerald Coast property and treating it as an investment, this belongs in your exit math from the day you buy — not the year you sell.

One more cost, separate from taxes. Florida charges a transfer tax on the sale itself: $0.70 for every $100 of the sale price, and the seller customarily pays it. On an $1.8 million sale that's $12,600. It's not a tax on your profit, but it comes out of the same check. Here's the full breakdown of what selling costs.

Can you roll the money into another property?

Sometimes, yes. It's called a 1031 exchange, and the idea is simple: instead of cashing out and paying the tax, you roll the proceeds straight into another investment property and push the tax bill down the road.

Here's how it works in practice:

• It has to be an investment property. Not a place you use yourself. This is where vacation homes get complicated.
• You get 45 days after closing to name the property you're buying, in writing.
• You get 180 days total to actually close on it.
• You never touch the money. A third-party company called a qualified intermediary holds the proceeds between the two closings. If the funds land in your account even for a day, the exchange is dead and the whole gain becomes taxable.

Now the vacation-home problem. A beach house you use with your family isn't automatically an "investment property" in the IRS's eyes, and they've been explicit about it.

There's a safe harbor — a set of conditions where the IRS agrees not to challenge you. For each of two 12-month periods, you have to:

• Rent it at market rate for at least 14 days, and
• Keep your own use under 14 days, or 10% of the days you rented it, whichever is more.

And this is the detail that kills most exchanges: your family and friends staying there counts as your use, unless they paid market rent. The week you let your sister have the place? That's your use. The long weekend you gave your college roommate? Yours.

For the property you're selling, those two years look backward. For the property you're buying, you have to keep it up for two years going forward.

So if you've owned a 30A house and used it the way people actually use beach houses — which is why you bought it — a 1031 might mean running it differently for two full years before you can sell. That's a plan you make years out, not a decision you make at the closing table.

What to do before you list

Call your CPA early. If a 1031 is even a maybe, that conversation needs to happen about two years before you sell, because the test looks backward.

Dig up your receipts. What you paid, your closing costs, and every major improvement all reduce your taxable profit. New roof, new HVAC, an addition, a real renovation — those count. Routine repairs and maintenance don't. Emerald Coast owners almost always have significant storm and salt-air work they never thought to file away. Go find it. It's worth real money.

Get your depreciation schedule if the place was ever rented, even briefly. Your accountant has it. You'll need it.

Ask what else is on the table. Depending on your situation there may be better options than a straight sale or a 1031 — spreading the payments over several years, moving into the property before selling, or holding it as part of your estate. Moving in isn't the loophole it sounds like, though; the years you used it as a rental can shrink the exclusion. Ask, don't assume.

Then price it right. No amount of tax planning helps if the house doesn't sell. The Emerald Coast luxury market rewards accurate pricing and punishes wishful thinking — 30A has been taking close to eleven months to work through its inventory.

Frequently Asked Questions

Do I pay capital gains tax on a vacation home in Florida?

Yes, at the federal level. Florida has no state income tax, so there's no state capital gains bill, but the federal rules apply in full. The big exclusion people know about — $250,000 single, $500,000 married — only covers the home you actually live in. A vacation home or second home doesn't qualify.

What is the capital gains rate on a second home in 2026?

If you've owned it more than a year: 0% if your taxable income is under $49,450 single or $98,900 married, 15% up to $545,500 or $613,700, and 20% above that. Add 3.8% if your income clears $200,000 single or $250,000 married. Remember the sale itself counts as income, which often pushes sellers into a higher bracket for that year. Your CPA can run your actual number.

Can I do a 1031 exchange on a vacation home?

Sometimes, but only if it counts as an investment property rather than a personal one. The IRS safe harbor asks you to rent it at market rate at least 14 days a year and keep your own use under 14 days — or 10% of the days you rented, whichever is more — for two years. Stays by family and friends count as your use unless they paid market rent.

What is depreciation recapture?

If you rented the property and wrote off depreciation, you pay that back when you sell, at a rate up to 25%. That's often higher than the rate on your actual profit. And it applies whether or not you claimed the deduction — if you could have taken it, the IRS treats it as taken.

How long do I have to complete a 1031 exchange?

You have 45 days from closing to identify the replacement property in writing, and 180 days to close on it. A third-party intermediary has to hold the money the entire time. If the funds hit your own account, the exchange fails and the full gain becomes taxable.

The bottom line

Selling a second home on the Emerald Coast costs more in tax than most owners expect. No big exclusion. An extra 3.8% for most sellers at this price point. And if you rented it, a depreciation bill at up to 25% that arrives all at once.

None of that means don't sell. It means the tax conversation belongs at the beginning of your planning, not at the closing table. And if a 1031 exchange is anywhere in your thinking, you need to start that conversation years ahead, not weeks.

This is general information, not tax advice. Talk to a qualified CPA or tax attorney about your own situation before you decide anything.